How to claim fire-damage losses on taxes

Deductions occur in the year of the loss, but federally declared disasters offer wrinkle.

- BY LIZ WESTON

MYUNG J. CHUN Los Angeles Times A FIREFIGHTER records information for a house destroyed by the Eaton fire in Altadena in January.

Dear Liz: My home in Pacific Palisades is still standing after January's fire but was damaged by smoke and ash.

The remediators deemed hundreds of personal property items unsalvageable. Our insurance company is paying us a highly depreciated amount for these items, with the full amount to be received upon the actual purchase of each replacement.

Since we won't replace every item, we'll end up with a sizable loss, which I understand can be claimed on our 2024 or 2025 tax return. I'm concerned that we won't know the total amount of loss by the end of 2025. Could you please discuss how to handle this?

Answer: Casualty losses are deductible in the year you sustained the loss. That's typically the year the loss occurred, although you may be able to deduct the loss in the previous tax year when it's part of a federally declared disaster, such as the January 2025 wildfires in Los Angeles, says Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting.