Tips For Property Investors And Business Owners

Barbara Schreihans, CEO and Founder of Your Tax Coach.

The January wildfires in Southern California have left many rental property owners and businesses grappling not only with devastating losses but also with questions about the tax implications associated with their situation. Amid the devastation, there’s a glimmer of hope that you can create a strategic tax relief plan to help you rebuild.

As the founder of a tax strategy firm, here are some of the things I encourage business owners to keep in mind following wildfires (and other natural disasters).

Disaster-Related Tax Flexibility

Businesses and individuals affected by the wildfires have unique filing flexibility. The IRS extended the tax filing and payment deadline to October 15, 2025, for those affected. California has mirrored the federal tax deadline postponement, offering additional breathing room for documentation and filing.

Those affected may also be able to choose to claim “uninsured or unreimbursed disaster-related losses” on either their 2024 or 2025 tax returns, even though the wildfires happened in 2025, according to the IRS. This could result in faster financial relief through immediate tax refunds.

But what if you need funds now? The IRS has a compassionate provision. This means taxpayers “impacted by a federally declared major disaster” can withdraw up to $22,000 from retirement accounts. This option offers three significant benefits:

• No 10% early withdrawal penalty.

• Taxable income spread across three years.

• Ability to repay the distribution within three years.

For Owners Of Investment Properties

For investors who lost tenant-occupied properties in a natural disaster, understanding the tax implications of property value losses is crucial. Let’s break down the potential tax relief benefits for an investor who lost a tenant-occupied property in the L.A. wildfires: With a $500,000 original purchase price, the investor might find their property’s fair market value plummeted from $550,000 (the value on the date of fire) to just $300,000 (basically just land value). If they were lucky enough to still be covered by insurance, they may have received $100,000 in insurance reimbursement. This means they could potentially claim a $150,000 loss deduction.

Property owners should also be aware of how their tenants may be impacted and ensure they understand potential tax relief options, particularly for personal property losses. In our example scenario, let’s say the tenant of the property has $150,000 worth of furniture, clothing and personal items that were destroyed. Maybe insurance pays them $50,000 for their loss; this could translate to a $100,000 deductible loss after insurance reimbursement.

For Business Owners

Now, what if you lost your business in a wildfire or another natural disaster? Businesses impacted by the wildfires (or another disaster event) may have additional disaster relief options as well. Businesses should also explore whether they qualify for and could leverage:

• Business interruption insurance proceeds.

• Net operating loss carryback or carryforward provisions.

• Expedited tax return filing for quicker refunds in federally declared disaster areas.

The wildfires also taught us a crucial lesson about documentation. If you’re stressed because you lost all your records in the fire, don’t panic. Work on requesting bank statements, contacting vendors for receipt copies, using pre-disaster photos as evidence and collecting insurance claim documentation.

Moving forward, I suggest digitizing important documents, using cloud-based backups, investing in secure accounting software and keeping offsite copies of financial records.

Final Thoughts

While tax relief can’t replace lost memories or restore destroyed properties, these provisions can offer a financial lifeline during incredibly challenging times. The IRS recognizes that disaster victims need support, not additional bureaucratic stress. For wildfire victims, understanding these tax benefits can make a meaningful difference in recovery.

Consult with a tax professional who understands disaster relief to help maximize available benefits and provide personalized guidance through this complex process. The road to recovery is long, but strategic tax planning can help you get one step closer to rebuilding your business and life.

The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.

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