The devastating 2025 California wildfires have left many families and businesses facing severe financial hardship. To support those affected, both federal and state tax relief programs have been introduced, offering extensions, deductions, and financial recovery options.
If you or your business suffered losses because of these fires, it's crucial to understand the available tax relief measures and take advantage of the assistance provided. Below, we’ll cover everything you need to know, from eligibility to filing extensions, deductions, and business recovery incentives.
Tax Extensions for Businesses and Individuals
Who Qualifies?
The IRS and California Franchise Tax Board (FTB) have announced automatic tax relief for those located in the federally declared disaster zones affected by the 2025 California wildfires. If you live in or operate a business in these areas, you qualify for:
- Extended deadlines to file tax returns and make tax payments
- Reduced or waived penalties for late payments
- Ability to claim disaster-related casualty losses on prior-year tax returns
To determine if your county is included in the federal disaster declaration, check the FEMA website for updates.
What Tax Extensions Are Available?
The new tax deadlines allow individuals and businesses additional time to meet filing and payment requirements:
- New filing deadline: October 15, 2025 (for returns originally due between January 7 and October 15, 2025)
Applies to:
- 2024 individual income tax returns (April 15, 2025, deadline extended)
- Estimated tax payments for January 15, April 15, June 15, and September 15, 2025
- Payroll and excise tax returns (January 31, April 30, and July 31, 2025)
- Business entity tax returns for partnerships, S corporations, and corporations
Additionally, state tax deadlines have been aligned with federal relief, ensuring California taxpayers receive the same extensions.
Deductions & Tax Credits for Fire Losses
If you experienced financial losses due to the wildfires, you may qualify for tax deductions to help recover your losses.
Federal Tax Return Deductions
- Under the Tax Cuts and Jobs Act, disaster-related casualty losses are only deductible in federally declared disaster areas.
- You can claim these losses on either your 2024 or 2025 tax return (whichever provides the best tax benefit).
- Use IRS Form 4684 (Casualties and Thefts) to report fire-related losses.
- You should include FEMA disaster declaration number 4856-DR on the return.
How to Calculate Your Losses
To determine your deductible loss:
- Total amount of damage to your property or business
- Subtract insurance proceeds and/or other reimbursements received for damages
- The remaining amount is reported on Schedule A, Itemized deductions
Business Recovery Options & Tax Incentives
Businesses affected by the fires may qualify for the following recovery assistance programs:
- Emergency tax relief from the California Department of Tax and Fee Administration (CDTFA), including:
○ Filing extensions
○ Penalty waivers
○ Sales tax relief for affected businesses
- California Employment Development Department (EDD) offers:
- 60-day extension to file payroll tax reports and deposit payroll taxes without penalties
- Federal Small Business Administration (SBA) Disaster Loans: Low-interest loans to help businesses rebuild and recover losses.
Taking advantage of these state and federal programs can help minimize financial hardship and speed up recovery efforts.
How Insurance Proceeds Affect Your Tax Relief
If you receive an insurance payout for damages, you must reduce your casualty loss deduction by the amount you receive. The IRS requires that:
- Any insurance payments received for fire losses must be deducted from the total reported loss.
- If you get more than what you paid for the property, you may have a taxable gain. This is unless you use the money to rebuild or replace the property.
- Special rules let you delay taxes on gains from involuntary conversions, like a fire disaster. You can do this if you use the money to restore the property within a certain time.
Be sure to document all losses, insurance settlements, and repair costs to accurately calculate your tax relief.
Don’t Miss Out on Relief
If you or your business were affected by the 2025 California wildfires, taking advantage of these tax relief measures can significantly ease your financial burden.
- Check your eligibility on the FEMA disaster declaration list.
- File for extensions if you need more time to pay or file.
- Deduct your fire-related losses on your 2024 or 2025 tax return.
- Seek business recovery options through state and federal agencies.
- Consult a tax professional to maximize your tax relief opportunities.
At LedgerFi, we help you understand tax laws. We make sure you claim every benefit you can. Contact us today for personalized tax relief assistance!
