What tax relief can a state disaster declaration trigger?

A state disaster declaration may open the door to federal deadline relief or a personal casualty loss deduction, but it does not automatically provide either benefit. Before advising a client, tax professionals must identify the relevant provision and verify that its separate requirements have been satisfied.

September is National Preparedness Month, making this a useful time to establish your verification process before the next hurricane, wildfire, flood or tornado affects a client.

One declaration can raise two tax questions

Two recent laws expanded the potential federal tax consequences of state-declared disasters.

• The Filing Relief for Natural Disasters Act, P.L. 119-29, amended §7508A to permit the Treasury Secretary to postpone certain federal tax deadlines following a qualified state-declared disaster
• Separately, the One Big Beautiful Bill Act (OBBBA), P.L. 119-21, expanded the personal casualty-loss deduction under §165 to include certain state-declared disasters for tax years beginning after Dec. 31, 2025

Note that relief under one provision does not establish eligibility under the other.

A state declaration does not move IRS deadlines by itself

Under §7508A, the Treasury Secretary may provide federal deadline relief for a qualified state-declared disaster after receiving a written request from the governor and consulting with the Federal Emergency Management Agency (FEMA). The IRS must then announce the applicable relief.

Therefore, a governor’s declaration is a signal to begin monitoring. The IRS announcement identifies the covered locations, affected taxpayers, postponed acts and applicable relief period. For example, this 2026 Wisconsin disaster-relief announcement specifies the covered counties, postponed deadlines and taxpayers eligible for relief. Some federal tax returns may be postponed, while certain payments or deposits may remain due.

For qualifying declarations made after July 24, 2025, P.L. 119-29 increased the mandatory postponement period from 60 days to 120 days. Tax professionals should still use the dates stated in the applicable IRS announcement rather than calculating or assuming a deadline from the state declaration.

Additionally,

• Taxpayers outside the designated area may qualify when records needed to meet a federal tax deadline are located within the covered area
• Relief workers affiliated with a recognized governmental or philanthropic organization may also qualify
• An individual visiting the covered area who was killed or injured because of the disaster may also be treated as an affected taxpayer
• A spouse filing a joint return with an affected taxpayer may also qualify

Taxpayers who are not automatically identified generally must contact the IRS to request relief.

State-declared casualty losses follow a separate path

Beginning with the 2026 tax year, personal-use casualty losses caused by a qualifying state-declared disaster may be deductible under §165(h)(5), subject to the applicable loss calculation and deduction limitations, including the rules for reimbursements. This change expands the deduction beyond losses tied solely to federally declared disasters, but it does not make every loss following a state emergency deductible.

The event must meet the statutory definition of a state-declared disaster, and the taxpayer must satisfy the other casualty loss requirements. The preparer must still establish the property’s basis, measure the loss under the applicable valuation rules and account for insurance or other expected reimbursement. The applicable per-casualty and adjusted-gross-income limitations must also be considered.

Do not assume that deadline postponement under §7508A also establishes casualty loss eligibility or that a state-declared casualty loss receives every rule available for a federally declared disaster. For example, the §165(i) election to claim a disaster loss on the preceding year’s return remains limited to losses attributable to a federally declared disaster. Check the declaration type and the specific relief provision separately.

Run this state-disaster check before answering a client

Keep the following verification checklist available when a client asks whether a state declaration provides federal tax relief:

• Identify the event: Record the incident period and exact property location. Then determine whether the declaration is state or federal.
• Separate the questions: First determine whether the issue involves a federal deadline or a casualty-loss deduction. Research any other disaster provision separately.
• Check the IRS announcement: For deadline relief, confirm that the IRS has acted. Record the covered area and affected-taxpayer definition, then identify each postponed act.
• Use the announced dates: Do not calculate the client’s new deadline solely from the incident date or state declaration.
• Test casualty-loss eligibility: For a personal loss beginning in 2026, verify that the event meets the state-declared-disaster definition and that the loss satisfies §165.
• Check reimbursements: Determine the insurance reimbursement and any government assistance. Document other recovery rights separately.
• Document the advice: Save the declaration, IRS announcement, relevant dates and the reason.
• Continue monitoring: Watch the IRS disaster-relief page for added localities or revised dates. Record any later relief that changes the client’s position.

Keep the two state disaster relief paths separate

State-declared disaster relief now requires tax professionals to track two distinct questions. Section 7508A controls whether federal deadlines are postponed, while §165(h)(5) controls whether certain personal casualty losses may be deductible beginning in 2026. Keeping those analyses separate helps the preparer apply the correct authority and document the conclusion. It also creates a clear monitoring point if the IRS later expands or revises the relief.

For a deeper look at casualty-loss eligibility and reporting, continue with NATP’s Understanding Tax Impacts of Casualty Losses and Ponzi Schemes on-demand webinar.