2025 California Wildfire Tax Relief

The following summarizes some of the available tax relief procedures for taxpayers affected by the Palisades, Eaton, Hurst, and other Los Angeles County wildfires. Answers to commonly asked disaster-related tax questions are also below:

Income Tax Filing Deadlines Extended

The Internal Revenue Service and California Franchise Tax Board announced that individuals and businesses in Los Angeles County (and potentially additional counties in the future) affected by wildfires and wind damage in January 2025 now have until October 15, 2025 to file many types of tax returns and to make tax payments. This includes:

• Individual income taxes (Form 1040 and 1040EZ) normally due April 15, 2025,
• 2024 contributions to IRAs and health savings accounts,
• Payments of estimated taxes that otherwise would have been due on January 15, April 15, June 16, and September 15, 2025.

For businesses, the postponement of filing returns and tax payments are available for calendar-year partnership and S corporations returns, normally due March 17, 2025 – and calendar-year corporation and fiduciary returns normally due April 15, 2025.

Businesses utilizing a fiscal year also receive a postponement until October 15, 2025 if their return deadline falls between January 7 and October 15, 2025.

It should be noted that Penalties for failing to make payroll and excise tax deposits due between January 7 and January 22, 2025, will be abated as long as the deposits are made by January 22, 2025.

Who Qualifies?

Currently this postponement of tax filing and payment deadline is available to any individuals or business with an address of record with the IRS located in Los Angeles County, with the IRS stating other counties affected will be added as necessary.

The IRS automatically provides filing and penalty relief to any taxpayer located in the disaster area, and no application or request for postponement is necessary.

For any person without an address of record in the disaster area that is affected, such as a taxpayer that moved to Los Angeles County since the filing of their last tax return, such taxpayer can received a late filing or late penalty abatement from the IRS during the postponement period (i.e. between January 7 and October 15, 2025) by calling the IRS phone number shown on the notice of any late filing or late payment penalty notice received.

Late filing and late payment relief may also be available for taxpayers who live outside the declared fire disaster area but whose records necessary to meet a tax filing deadline during the postponement period are located in the disaster area. Taxpayers in need of such relief should contact the IRS to make such a request. Late filing and payment relief is also available to relief workers affiliated with a government agency or philanthropic organization involved in disaster relief.

Reduction of Property Tax Assessment

There are two procedures for reducing the assessed value of real property in Los Angeles County.

For any property that has been damaged or destroyed by a natural disaster, and the loss exceeds $10,000 in current market value, a property owner can request that the County Assessor reassess the value of the real property. To apply for reassessment of the damaged or destroyed property, property owners must file Form ADS-820, “Property Damaged or Destroyed by Misfortune or Calamity,” with the County Assessor within twelve months from the date the damage or destruction occurred.

Generally, payment of property tax is still required until a Form ADS-820 request has been approved for the full pre-damage assessed value of the property. Property owners may file Form ADS-820.3, “Property Tax Installment Deferral Application” on or before the delinquency date on their property tax bill installment following the calamity (the deadlines are April 10 and December 10) to request property tax payment relief for the damaged or destroyed property.

However, on January 16, Governor Gavin Newsom signed Executive Order N-10-25 directing that taxpayers in the following zip codes may postpone their property tax payments and business personal property tax statements filings until April 10, 2026, without being subject to penalties and/or interest:

This postponement relief does not apply to payments made through an impound account nor to any taxes on the property that were delinquent as of January 6, 2025.

If the current market value of real property is less than its assessed value as of January 1 of the current year, property owners may file an application for a Decline-In-Value Review. The filing period for the annual Decline-in-Value Review is from July 2 through November 30.

Transfer of Property Tax Assessed Value of Destroyed Home to New Home

One of the benefits of the much-maligned Proposition 19, which was approved by voters in 2020 and became effective on February 2021, allows homeowners to transfer the property tax assessed value of a substantially damaged or destroyed residence to a replacement home. For homeowners who owned their original residence for many years before its damage or destruction, this can result in substantial property tax savings when compared to the fair market value of any replacement residence.

A claim for a transfer of base year assessed value pursuant to Proposition 19 (Form BOE-19-V) must be made within two years of the destruction of the original residence, which would require a replacement residence be purchased or built by such deadline.

Because of the widespread destruction of property caused by the 2025 California wildfires, the number of structures that will need to be rebuilt, and finite construction resources and available builders — completing a reconstruction of a residence within the two year deadline may not be possible. Completing after the two-year deadline would cause the rebuilt residence to be assessed at the fair market value at the time the construction is completed.

Income Tax Deduction for Disaster-Related Losses

Individuals or business in a federally declared disaster area who suffer uninsured or unreimbursed disaster-related losses can choose to claim them on either the return for the year the loss occurred (for fire damage sustained in 2025, on the 2025 return) or for the return for the prior year (2024) for both their federal and California state taxes.

Be sure to write the FEMA declaration number on any return claiming a loss. For further information, see IRS Publication 547, “Casualties, Disasters, and Thefts.”

Taxability of Disaster Relief Payments or Insurance Proceeds

Qualified disaster relief payments and insurance proceeds on destroyed property are generally excluded from gross income. However, reimbursement from either disaster relief programs or insurance policies will limit or eliminate income tax deductions for disaster-related losses. If you have any questions about tax relief related to the Los Angeles wildfires, contact us immediately.

Zane S. Averbach and Alex J. Hemmelgarn are attorneys who represent corporate, and tax-planning clients at our firm. Alex is a State Bar of California Specialist in Tax Law.

This information provides an overview of a specific developing situation. It is not intended to be, and should not be construed as, legal advice for any particular fact or situation.