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FTB Publication 1034

2017 Disaster Loss How to Claim a State Tax Deduction

Table of Contents

2017 Disaster Loss: How to Claim a State Tax Deduction

Taxpayers affected by California disasters declared by the President and/or the Governor should write the name of the disaster in red ink at the top of their tax return the year they claim the loss and file the return with the Franchise Tax Board (FTB).

What's New

Disaster Losses

A new Section D has been added to the federal Form 4684 to make an IRC Section 165(i) election. This section applies to California disasters. See Note on page 4.

General Information

For a list of the most current California disasters declared by the President and/or the Governor, go to ftb.ca.gov and search for disaster loss for individuals and businesses.

For taxable years beginning on or after January 1, 2014, and before January 1, 2024, taxpayers may deduct a disaster loss for any loss sustained in any city, county, or city and county in California that is proclaimed by the Governor to be in a state of emergency. For these Governor-only declared disasters, subsequent state legislation is not required to activate the disaster loss provisions. Any law that suspends, defers, reduces, or otherwise diminishes the deduction of a net operating loss (NOL) shall not apply to a net operating loss attributable to these specified disaster losses. The President’s declaration continues to activate the disaster loss provisions. For a complete list of all disasters declared by the President and/or the Governor, see the “Recent Disaster Loss Relief” chart on page 7 and page 8.

This publication is designed to help you with financial recovery and explains how you can claim your financial loss as a deduction on your California tax return.

For additional information specific to your disaster see page 7 and page 8 of this publication or form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Individuals, Estates, and Trusts and form FTB 3805Q, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Corporations.

Casualty and Disaster Losses

California law generally follows federal law regarding the treatment of losses incurred as a result of a casualty or a disaster. To qualify as a disaster loss for federal purposes, the President of the United States must declare the area in which the disaster occurred as a disaster area, eligible for federal assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. This includes a major disaster or emergency declaration under the Act. A pronouncement by the Governor of California declaring an area as a disaster or emergency area is not enough to qualify as a disaster loss for federal purposes.

A casualty loss occurs when your property is lost or damaged due to an earthquake, fire, flood, or similar event that is sudden, unexpected, or unusual. You usually qualify for a casualty loss deduction for tax purposes when insurance or other reimbursements do not repay you for damage to your property. For California purposes, your casualty loss becomes a disaster loss when both of the following occur:

  • You sustain the loss in an area the President of the United States or the Governor of California declares a state of emergency.
  • You sustain the loss because of the declared disaster.

Special tax rules apply to disaster losses. You can claim a disaster loss in the taxable year the disaster occurred or in the taxable year immediately before the disaster occurred. The advantage of claiming a disaster loss in the prior year is that the loss will generally reduce the prior year tax liability generating a refund that the FTB can quickly issue.

Claiming a Disaster Loss on an Amended Tax Return

You can claim a disaster loss either on an amended tax return filed for the preceding year or on the tax return filed for the year of the loss. If you have already filed your tax return for the preceding year, you can claim a disaster loss against that year’s income by filing amended tax return.

Schedule X, California Explanation of Amended Return Changes

For taxable years beginning on or after January 1, 2017, the Schedule X has replaced the Form 540X, Amended Individual Income Tax Return. For additional information, see Instructions for Filing Amended Returns in the personal income tax booklets.

The due date for filing an amended individual tax return is April 15 following the year of the loss, unless extended. For example, you sustained a disaster loss in August 2017. You can claim the loss on your 2017 tax return when you file it by April 17, 2018, or claim the loss immediately on your 2016 tax return. If you already filed your 2016 tax return, complete an amended tax return. You must make the election to claim the loss on your 2016 tax return by April 17, 2018, the original due date for the 2017 tax return or by the extended due date. For more information, see page 5, When to Claim Your Disaster Loss.

Disaster Loss Carryover Rules

For disasters that occurred in taxable years 2004 through 2011, you are allowed to carryover 100% of the excess loss for up to 15 years. Exception: Certain disasters that were Presidentially declared with no subsequent California legislation can be carried over for 20 years.

See the “Recent Disaster Loss Relief” table on page 7 and page 8 for a list of the disasters that qualify for the 20 years disaster loss carryover.

For disaster losses incurred in taxable years 2000 through 2003, you can deduct any excess loss that remains after the five-year period for up to 10 more years at the following percentage rates:

Percentage Allowed to Carry Over For Disasters incurred in Taxable Year
60 2002 and 2003
55 2000 and 2001

If you have both disaster loss carryovers and net operating loss carryovers, you must use them in the order you incurred them. There is no requirement to deduct NOL carryovers, before disaster loss carryovers.

Taxpayers should complete form FTB 3805V or form FTB 3805Q for the year of loss to compute the carryover.

Net Operating Loss Carryback General Rule

Taxpayers must first carry back the entire NOL incurred in 2017 to the preceding two years. Any loss not applied in the preceding two years can be carried forward up to 20 years. For more information, get form FTB 3805V or form FTB 3805Q.

How to Calculate a Disaster Loss

Compute your tax loss on your federal tax return and transfer that loss amount to your California tax return. In some cases, you may need to make adjustments between state and federal tax laws on your California tax return. For more information, get FTB Pub. 1001, Supplemental Guidelines to California Adjustments.

Individuals

Calculate your disaster loss by reporting California amounts on federal Form 4684, Casualties and Thefts, Section A - Personal Use Property, and submitting this form with your California tax return. If you are claiming a disaster loss on a prior year return, then see the note in the next column for additional instructions.

Determine your personal loss by using the smaller of the decrease in the fair market value of your property due to the casualty or the adjusted basis of the property. Fair market value means the amount at which property would change hands between a willing buyer and seller. Adjusted basis generally means what you paid for the property plus the cost of any improvements, less deductions such as depreciation. To determine your allowable loss, deduct insurance proceeds or other reimbursement you received or expect to receive. Next, subtract $100 and then 10% of your federal adjusted gross income. Claim the remaining amount as your casualty or disaster loss.

Businesses

Calculate your disaster loss by reporting California amounts on federal Form 4684, Casualties and Thefts, Section B – Business and Income-Producing Property. If the business is claiming a disaster loss on a prior year return, then see the note below for additional instructions.

Determine your business loss by using the smaller of the decrease in the fair market value of your property due to the casualty or the adjusted basis of the property. To determine the allowable loss, deduct insurance or other reimbursement you received or expect to receive.

Note:

If you or a business are making an election under IRC Section 165(i) to claim a loss on the preceding year, then complete the federal Form 4684, Section D - Election To Deduct Federally Declared Disaster Loss in Preceding Tax Year, in additional to Section A or Section B.

Federal Postponement Periods

California automatically follows federal postponement periods as announced by the Internal Revenue Service (IRS). The IRS may postpone for up to one year certain tax deadlines for taxpayers affected by a Presidentially declared disaster. Tax deadlines subject to postponement include those for filing tax returns, paying income taxes, and making contributions to a traditional Individual Retirement Arrangement (IRA) or Roth IRA. The IRS and the FTB may cancel the interest and penalties on underpaid income tax for the length of any postponement deadlines.

If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement:

  • Any individual whose main home is located in a covered disaster area.
  • Any business whose principal place of business is located in a covered disaster area.
  • Any relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered disaster area.
  • Any individual or business whose records are needed to meet a postponed deadline, provided those records are maintained in a covered disaster area. Note: The main home or principal place of business does not have to be located in the disaster area.
  • Any estate or trust that has tax records needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area.
  • The spouse on a joint tax return with a taxpayer who is eligible for postponements.
  • Any other person determined by the IRS to be affected by a Presidentially-declared disaster.

Disasters Outside of California

If you meet the qualifications to claim a disaster loss anywhere within the United States and have a California tax-filing requirement (resident or nonresident), the same disaster rules and postponement periods automatically apply to you. Be sure you indicate on your tax return the name and date (in red at the top of your tax return) of which disaster you are claiming a loss.

Documentation You Must Attach to your California Tax Return

To report your losses, you may need the following California forms:

  • Schedule D-1, Sales of Business Property.
  • Form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Individuals, Estates, and Trusts.
  • Form FTB 3805Q, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Corporations.

You must also include these federal forms in your disaster loss documentation:

  • A federal Form 4684, Casualties and Thefts (use California amounts).
  • A copy of your federal Form 1040, U.S. Individual Income Tax Return, or 1040X, Amended U.S. Individual Income Tax Return.
  • A copy of your federal Form 1120, U.S. Corporation Income Tax Return, or 1120X, Amended U.S. Corporation Income Tax Return.
  • Any supporting federal schedules that verify your deduction.

If you are claiming a disaster loss on the current year return, you must attach a clearly written statement to your loss documentation that indicates:

  • The date of the disaster.
  • The location of the disaster (city, county, and state).

If you are claiming a disaster loss on the prior year return, see the note under How to Calculate a Disaster Loss on page 4.

It is a good idea to take and keep photos of the damaged property to document the loss.

For filing deadline dates specific to your disaster, refer to the table on this page under When to Claim Your Disaster Loss.

When to Claim Your Disaster Loss

The deadlines for electing a prior year deduction versus claiming your loss on the current year are:

Individual Tax Returns:

Year of Loss Prior Year Tax Return Current Year Tax Return
2016 2015: Claim on original or amended 2015 tax return by April 18, 2017. 2016: Claim on the 2016 tax return.
2017 2016: Claim on original or amended 2016 tax return by April 17, 2018. 2017: Claim on the 2017 tax return.
2018 2017: Claim on original or amended 2017 tax return by April 15, 2019. 2018: Claim on the 2018 tax return.

Corporation Tax Returns:

Year of Loss Prior Year Tax Return Current Year Tax Return
2016 2015: Claim on original or amended 2015 tax return by the current year’s original due date. 2016: Claim on the 2016 tax return.
2017 2016: Claim on original or amended 2016 tax return by the current year’s original due date. 2017: Claim on the 2017 tax return.
2018 2017: Claim on original or amended 2017 tax return by the current year’s original due date. 2018: Claim on the 2018 tax return.

How to Replace California Tax Returns Lost or Damaged in a Disaster

If your tax returns are lost or damaged in a disaster, we can replace your California tax returns at no cost. Complete form FTB 3516, Request for Copy of Tax Return. Print the name of the disaster at the top of the form, and we will send you copies of your most recently filed tax return.

You can also request a copy of your lost or damaged tax return by writing us a letter that includes all of the following:

  • Your name
  • Your address
  • Your social security number (for personal income tax returns)
  • Your California corporation number, California Secretary of State file number, or federal employer identification number (for business entity tax returns)
  • The tax year requested
  • Your signature

Please send your request to the address listed below.

DATA STORAGE
FRANCHISE TAX BOARD
PO BOX 1570
RANCHO CORDOVA CA
95741-1570

Where to Get Forms to Claim Your Loss

You can download and print California tax forms and publications at ftb.ca.gov/forms. You can also order forms by calling 800.338.0505.

To order personal income tax forms, select the personal income tax forms option and any of the following form codes when prompted:

  • 900 – California Resident Income Tax Booklet (includes Form 540)
  • 914 – California Nonresident Income Tax Booklet (includes Long and Short Form 540NR)
  • 908 – Schedule X, California Explanation of Amended Return Changes
  • 909 – Schedule D-1, Sales of Business Property
  • 926 – Form FTB 3805V, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations - Individuals, Estates, and Trusts
  • 937 – Form FTB 3516, Request for Copy of Personal Income Tax or Fiduciary Return

To order business entity tax forms, select business entities tax forms option, and any of the following form codes when prompted:

  • 816 – California S Corporation Tax Booklet (includes Form 100S)
  • 817 – California Corporation Tax Booklet (includes Form 100)
  • 816 and 817 – Form FTB 3805Q, Net Operating Loss (NOL) Computation and NOL and Disaster Loss Limitations – Corporations

Form 100X, Amended Corporation Franchise or Income Tax Return, is available at ftb.ca.gov/forms.

Refunds

Our commitment is to quickly issue refunds to disaster victims.

Taxpayers may e-file their original and amended tax returns. If you electronically file your disaster loss tax return, follow your tax software instructions to enter the disaster information.

You can also file paper tax returns. To help us process your refund quickly, use red ink to print the name of the disaster at the top of Side 1 of your California tax return (for example: DISASTER – WALL FIRE 2017).

We give these disaster tax returns top priority and will process them as quickly as possible. Go to ftb.ca.gov and click on Where is My Refund to check your refund status.

Information and Assistance on Claiming a California Disaster Loss

Internet and Telephone Assistance

Telephone assistance is available year-round from 7 a.m. until 5 p.m. Monday through Friday, except holidays. Hours are subject to change.

Website:
ftb.ca.gov
Telephone:
800.852.5711 from within the United States
916.845.6500 from outside the United States
TTY/TDD:
800.822.6268 for persons with hearing or speech disability
711 or 800.735.2929 California relay service

Asistencia Por Internet y Teléfono

Asistencia telefónica está disponible durante todo el año desde las 7 a.m. hasta las 5 p.m. de lunes a viernes, excepto días feriados. Las horas están sujetas a cambios.

Sitio web:
ftb.ca.gov
Teléfono:
800.852.5711 dentro de los Estados Unidos
916.845.6500 fuera de los Estados Unidos
TTY/TDD:
800.822.6268 para personas con discapacidades auditivas o del habla
711 ó 800.735.2929 servicio de relevo de California

Federal Forms and Information

Common casualty or disaster forms and publications:

  • Form 4684, Casualties and Thefts
  • Publication 547, Casualties, Disasters, and Thefts
  • Publication 584, Casualty, Disaster, and Theft Loss Workbook (Personal-Use Property)
  • Publication 584B, Business Casualty, Disaster, and Theft Loss Workbook

To get forms and other tax information from the IRS go to irs.gov. You can also call the IRS at 800.829.1040. To get federal forms by mail, call 800.TAX.FORM (800.829.3676).

Federal Emergency Management Agency (FEMA)

Call FEMA at 800.462.9029 to get a list of Disaster Recovery Centers in your area. You can access their website at fema.gov.

Recent Disaster Loss Relief

For a list of the most current California disasters declared by the President and/or the Governor, go to ftb.ca.gov and search for disaster loss for individuals and businesses.

Disaster Code Incident Period Disaster County Federal Loss Throwback Election State Loss Throwback Election State Throwback Election Extention1 100% Disaster Loss Carryover Period
90 October 2017 Solano County Atlas Fire Solano Yes Yes Yes 20 years
89 October 2017 Cherokee, LaPorte, Sulphur, Potter, Cascade, Lobo, & Canyon Fires Butte, Lake, Mendocino, Nevada, Orange Yes Yes Yes 20 years
88 October 2017 Tubbs, Atlas & Multiple Other Fires Napa, Sonoma, Yuba Yes Yes Yes 20 years
87 August 2017 & September 2017 Railroad, Pier, Mission, & Peak Fires Madera, Mariposa, Tulare No Yes Yes 20 years
86 September 2017 La Tuna Fire Los Angeles No Yes Yes 20 years
85 August 2017 Ponderosa Fire Butte No Yes Yes 20 years
84 August 2017 Helena Fire Trinity No Yes Yes 20 years
83 December 2016 Siskiyou County Rainstorm (Declared August 2017) Siskiyou No Yes Yes 20 years
82 July 2017 San Bernardino County Rainstorm San Bernardino No Yes Yes 20 years
81 July 2017 Modoc County Fires Modoc No Yes Yes 20 years
80 July 2017 Detwiler Fire Mariposa No Yes Yes 20 years
79 July 2017 Alamo & Whittier Fires Santa Barbara No Yes Yes 20 years
78 July 2017 Wall Fire Butte No Yes Yes 20 years
77 January 2017 January Winter Storms Alameda, Alpine, Butte, Calaveras, Contra Costa, El Dorado, Fresno, Humboldt, Inyo, Kern, Kings, Lake, Lassen, Los Angeles, Madera, Marin, Mendocino, Merced, Modoc, Monterey, Napa, Nevada, Orange, Placer, Plumas, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Shasta, Sierra, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Tehama, Trinity, Tulare, Toulumne, Ventura, Yolo, Yuba No Yes Yes 20 years
76 December 2016 December Winter Storms Del Norte, Humboldt, Mendocino, Shasta, Santa Cruz, Trinity No Yes Yes 20 years
75 August 2016 Blue Cut Fire San Bernardino No Yes Yes 20 years
74 August 2016 Clayton Fire Lake No Yes Yes 20 years
73 August 2016 Chimney Fire San Luis Obispo No Yes Yes 20 years
72 July 2016 Soberanes Fire Monterey No Yes Yes 20 years
71 July 2016 Sand Fire Los Angeles No Yes Yes 20 years
70 June 2016 Erskine Fire Kern No Yes Yes 20 years
69 December 2015 Carlsbad Rainstorms San Diego (City of Carlsbad) No Yes Yes 20 years
68 October 2015 Rainstorms Inyo, Kern, Los Angeles No Yes Yes 20 years
67 September 2015 Valley Wildfire Lake2, Napa Yes2 Yes Yes 20 years
66 September 2015 Butte Wildfire Amador, Calaveras2 Yes2 Yes Yes 20 years
65 July 2015 Severe Rainstorms Imperial, Kern, Los Angeles, Riverside, San Bernardino, San Diego No Yes Yes 20 years
64 July 2015 Wildfire Lake, Trinity No Yes Yes 20 years
63 June 2015 Wildfire Butte, El Dorado, Humboldt, Lake, Madera, Napa, Nevada, Sacramento, San Bernardino, San Diego, Shasta, Solano, Tulare, Tuolumne, Yolo No Yes Yes 20 years
62 May 2015 Oil Spill Santa Barbara No Yes Yes 20 years
61 February 2015 Severe Rainstorms Humboldt, Mendocino, Siskiyou No Yes Yes 20 years
60 February 2015 Mono Wildfire Mono No Yes Yes 20 years

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