So far this year, 33 states have been declared federal disaster areas, with some regions qualifying multiple times. Losses, particularly due to Hurricanes Milton and Helene, are expected to reach tens of billions of dollars. The situation is worsened by many victims lacking adequate or proper insurance to cover these damages.

Some of these losses could be tax-deductible, offering partial relief, but strict and complicated rules limit how much can be recovered. Under current law, losses from federally declared disasters, like hurricanes or wildfires, are deductible, but isolated incidents like a house fire don’t qualify.

Several factors reduce deductible amounts: taxpayers must subtract FEMA and insurance reimbursements, plus 10% of their adjusted gross income (AGI), which is usually higher than taxable income. Furthermore, deductions can’t exceed the asset’s cost basis—often the purchase price of a home, rather than its market or assessed value. In reality, these limits often result in smaller-than-expected deductions.

Taxpayers should check the IRS website for disaster-related tax deadline extensions, which vary by location due to the high number of disasters this year.