The devastating wildfires that swept through Southern California in 2025 (“2025 Wildfires”) left
many homeowners and businesses grappling with significant property damage and financial
losses. In response to these events, President Biden declared the affected areas as federal disaster
zones, enabling taxpayers to claim casualty loss deductions under federal law. For taxpayers
affected by the 2025 Wildfires, understanding the steps to claim this deduction is essential for
seeking financial relief. This article focuses on what taxpayers affected by the 2025 Wildfires
need to know and do to take advantage of the casualty loss deduction for California income tax
purposes.

Federal Tax Relief and Casualty Loss Deduction

Under federal law, taxpayers can deduct losses caused by sudden, unexpected, or unusual events
such as natural disasters.  Since the 2025 wildfires were declared a federal disaster by President
Biden, affected taxpayers can claim deductions for their personal use property to the extent such
losses are not fully reimbursed by insurance or other compensation. In order to calculate the
amount of the deduction, taxpayers must do the following:
1. Calculate the Loss: Determine the lesser of the property’s adjusted basis (original cost
adjusted for improvements or depreciation) or the decrease in fair market value (“FMV”)
caused by the Wildfires.
2. Subtract Insurance Recoveries: Reduce the calculated loss by any insurance payouts
received.
3. Apply Federal Reductions: Subtract $100 for each casualty event, then reduce the
remaining loss by 10% of adjusted gross income (“AGI”).
To claim the deduction, taxpayers need to complete IRS Form 4684 (Casualties and Thefts) and
include it with their federal tax return (Form 1040). For faster relief, taxpayers can elect to claim
the casualty loss on their 2024 return instead of their 2025 return.  This may result in a quicker
refund by filing an amended return for 2024.

California Tax Relief and Casualty Loss Deduction

California law conforms closely to federal rules for casualty loss deductions but includes some
key differences.

1. Taxpayers can deduct losses caused by federally declared disasters such as the 2025
Wildfires.

2. California does not allow taxpayers to carryback losses to previous years, but permits
unused losses to be carried forward for up to 20 years.

3. To claim the casualty loss, taxpayers need to complete federal Form 4684 using
California amounts and include it with their California return (Form 540 or Form 541).
For taxpayers choosing to claim the casualty loss for the 2024 tax year, write the name of the
wildfire and the year it occurred in blue or black ink at the top of the California return. Electronic
filers should follow their software’s instructions for entering disaster information. Supporting
documentation, including photos, receipts, and appraisals, should be retained in case of audit.

Filing and Payment Extensions

The California Franchise Tax Board (“FTB”) has extended the filing and payment deadlines for
affected taxpayers. Individual or business taxpayers in Los Angeles County affected by the 2025
Wildfires have until October 15, 2025, to file and pay taxes due between January 7, 2025, and
October 15, 2025. This extension applies to:
Individual income tax returns normally due on April 15, 2025.
– Quarterly estimated tax payments due on January 15, April 15, June 15, and September
15, 2025.
– Corporate and passthrough entity (“PTE”) returns normally due on March 15 and April
15, 2025.
– Tax-exempt organization returns due on May 15, 2025.
If taxpayers receive a late filing or payment penalty notice, contact the FTB to have the penalty
abated. Additionally, taxpayers can request free copies of lost or damaged California tax returns
by filing Form FTB 3516 (Request for Copy of Personal Income or Fiduciary Tax Return) with
the wildfire’s name written at the top.
At Ascendant LLP, we understand the challenges of recovering from a disaster of this magnitude.
We’re here to assist you in navigating the complexities of federal and state tax laws, ensuring
taxpayers affected by the 2025 Wildfires claim all available deductions and benefits. From
calculating casualty losses to preparing and filing amended tax returns, we are ready to guide
affected taxpayers through every step of the process.
Our team is also available to help with documentation, filing deadline extensions, and resolving
issues such as penalties or disputes with the IRS or FTB. We are committed to providing
personalized support to help those affected by the 2025 Wildfires to rebuild and recover
financially.

Next Steps for Affected Taxpayers

1. Document the Loss: Gather evidence such as photographs, receipts, appraisals, and
insurance claims to substantiate the casualty loss.
2. File Return Promptly: Take advantage of the extended deadlines offered by the FTB to
file and pay taxes, ensuring you indicate the wildfire’s name and the tax year on your
return.
3. Claiming the Deduction: Complete Form 4684 and attach it to your state (and federal)
tax returns. Choose whether to claim the casualty loss for 2024 or 2025, depending on
your financial needs.
4. Consult a Tax Professional: If you need assistance with claiming a casualty loss
including, calculating the amount of the loss, filing federal and/or California tax returns,
or addressing other tax-related issues, we’re here to support you.
By working together, we can help taxpayers maximize their tax relief and provide the guidance
to navigate this difficult time. Contact our office today to schedule a consultation.