Hurricane Isaias and the Hurricane Damage Tax Deduction: A Plain-English Panhandle Guide

Hurricane Isaias came ashore near Destin on the evening of Oct. 9, 2026, as a Category 2 storm with 105 mph winds. Across the western Panhandle, a lot of us are now juggling tarps, roofers, adjusters, and insurance paperwork, not thinking about a hurricane damage tax deduction. Taxes are the last thing on anybody's mind.

But Isaias already has a federal declaration, and that means real help, including IRS deadline relief and that deduction. How much help depends partly on what FEMA does next.

I'm Brian Dela Cruz, CPA (MA), owner of Take Flight Business Solutions near Cantonment in Northwest Florida. We work virtually, here at home and anywhere else. Here's what Panhandle families and business owners should know. (This guide is current as of Oct. 16, 2026.)

Step One: Know Your Declaration (EM-3655)

On Oct. 9, the President approved an emergency declaration for Isaias, FEMA EM-3655-FL. It covers 27 Florida counties, including Escambia, Santa Rosa, Okaloosa, Walton, Bay, and Leon. See the full list on FEMA's EM-3655 page.

The "EM" is the detail that matters. An emergency declaration supports government response work, and it doesn't include FEMA grants to households. A major disaster ("DR") declaration is broader, and it unlocks better tax rules. FEMA hasn't yet decided on individual assistance, and local officials have started the damage assessments that come before a major disaster request. Reporting your damage to your county (Escambia's report is at myescambia.com) helps document the need, but it isn't a FEMA application.

Here's what each kind of declaration means for your taxes:

IRS Deadline Relief: Feb. 8, 2027

The IRS announced relief on Oct. 14 ( news release FL-2026-07). If your address of record is in a covered county, it's automatic, with no call or form needed. Most federal filing and payment deadlines from Oct. 9, 2026, through Feb. 7, 2027, now fall on Feb. 8, 2027, including:

• 2025 individual returns on extension (normally due Oct. 15)
• The Jan. 15, 2027, estimated tax payment
• Quarterly payroll and certain excise returns due Nov. 2, 2026, and Feb. 1, 2027

What doesn't move: 2025 balances that were due April 15, 2026 (interest keeps running), W-2s and 1099s, and payroll deposits. Deposit penalties are waived only for deposits due Oct. 9 through Oct. 25 that are made by Oct. 26, 2026.

Got a penalty notice dated in the window? Call the number on it. Live outside the area? See the next section. And under the Disaster Related Extension of Deadlines Act (P.L. 119-64), a disaster postponement counts as an extension for refund-claim deadlines. Alabama neighbors have separate relief, with deadlines postponed to Feb. 4, 2027.

Not in the Panhandle? You May Still Qualify If Your Records Are With Us

Because we work virtually, many of our clients live far from Escambia County. If that's you, this relief may still reach you. Under the IRS rules ( Treas. Reg. § 301.7508A-1(d)(1)), affected taxpayers include people and businesses outside the covered area whose records needed to meet a deadline are located in the covered area. FL-2026-07 adds that tax professionals in the area who maintain those records may contact the IRS for their clients. The release also covers relief workers affiliated with a recognized government or philanthropic organization who are assisting in the area.

Here's the catch: it isn't automatic for you. The IRS applies relief automatically only to taxpayers it identifies as located in the covered area. If you live or do business outside it, call IRS Special Services at 866-562-5227 to request relief.

Please don't let that slow you down. Reach out before your deadline, and we'll confirm whether your records qualify, help you make the call (or, with your authorization, contact the IRS for you), and document the request in your file.

Is Isaias Damage Tax Deductible? The Hurricane Damage Tax Deduction Explained

For personal-use property (your home, car, furniture) in the 27 counties, generally yes. Since 2018, those losses are deductible only when they come from a federally declared disaster, and the One Big Beautiful Bill Act (P.L. 119-21) made that rule permanent. Under IRS Publication 547, an emergency declaration counts, so EM-3655 qualifies.

For now, the ordinary rules apply. Each item's loss is the smaller of your adjusted basis (usually what you paid, plus improvements) or the drop in fair market value, minus insurance or other reimbursement. Then you:

1. Subtract $100 per casualty, and
2. Deduct only the amount over 10% of your adjusted gross income (AGI).

You also have to itemize. For many households, the 10% floor wipes out most of the deduction.

Two Florida tips. Your hurricane deductible is part of your unreimbursed loss: on $300,000 of dwelling coverage, a 2% deductible means the first $6,000 is on you. And the IRS lets you measure home damage in simpler ways, such as the lower of two contractor repair estimates for losses up to $20,000 ( Rev. Proc. 2018-08).

If Isaias Becomes a Major Disaster

The Doug LaMalfa Federal Disaster Tax Relief Certainty Act (P.L. 119-108), signed Sept. 11, 2026, wrote much friendlier "qualified disaster loss" rules into the tax code: a $500 reduction per casualty, no 10%-of-AGI floor, and a deduction you can take on top of the standard deduction. They apply only to major disasters (DR) whose incident period begins before Jan. 1, 2027, not to emergency declarations.

The difference can be large. Say your AGI is $80,000 and your unreimbursed loss is $10,000:

• Under EM-3655 today:$10,000 − $100 − $8,000 = $1,900, and only if you itemize.
• If a major disaster declaration covers your county:$10,000 − $500 = $9,500, even with the standard deduction.

The same upgrade would open penalty-free disaster distributions under SECURE 2.0: up to $22,000 from your IRAs and workplace plans combined, with the income generally spread over three years and the option to repay within three years (Form 8915-F). Until then, they aren't available for Isaias.

One heads-up: current IRS publications and forms, including Pub. 547 and Form 4684, were written before P.L. 119-108, so watch for updated versions before you file.

Claiming Your Loss on Your 2025 Return (Sec. 165(i))

You can elect to deduct your Isaias loss on your 2025 return instead of your 2026 return, which can mean a faster refund for repairs. If you're still on extension for 2025, the new Feb. 8 deadline may let you claim it right on your original return. Otherwise, you'd generally amend.

Make the election on Form 4684, Section D, and write 3655-EM on the return. For calendar-year filers, the election deadline is Oct. 15, 2027. Which year is better depends on your income in each year and on whether a major disaster declaration follows, so run the numbers both ways before you decide. Waiting for your 2026 return can make more sense if you expect higher income in 2026 (a bigger deduction saves more at a higher bracket), if your insurance claim is still unsettled, or if amending 2025 would cost more than the faster refund is worth.

Insurance, Relief Payments, and Possible Gains

• Insurance reduces your loss. File a timely claim; you can't deduct what insurance would have covered. With a claim pending, generally wait on the part you reasonably expect back.
• You can have a gain. Insurance above your adjusted basis is a gain, often postponable by buying replacement property. For a main home in a federally declared disaster area, you generally get four years after the end of the first tax year you realize the gain ( IRS Publication 547), and insurance for unscheduled contents creates no recognized gain.
• Many relief payments aren't taxable. Qualified disaster relief payments for necessary living or funeral expenses, or home and contents repairs, are generally excluded from income. Repair payments also reduce your deductible loss.

Business Property Is Different

The personal-use limits above don't apply to business or income-producing property like your shop, equipment, or rentals. Those losses are generally deductible with or without a declaration, and a completely destroyed business asset generally produces a loss equal to its adjusted basis minus reimbursements. IRS Pub. 584-B is a helpful workbook.

Florida Property Tax Refund for Uninhabitable Homes

If Isaias left your home uninhabitable for at least 30 days, Florida law ( Sec. 197.319, Florida Statutes) offers a partial refund of your 2026 property taxes, based on the home's lost value and the number of days it was uninhabitable. File Form DR-465 with your county property appraiser by March 1, 2027, and keep proof such as utility bills, insurance records, contractor statements, and permits. Detached structures like sheds and pools don't count, and the refund is issued after your 2026 taxes are paid.

Lost Your Records? The IRS Will Help

Write 3655-EM in bold at the top of Form 4506 or Form 4506-T to get free copies of prior returns. Free transcripts are in your IRS Online Account, and the IRS has a guide on reconstructing records after a natural disaster or casualty loss.

Your Post-Isaias Tax Checklist

• ☐ Confirm your county is on the EM-3655 list, and watch for a DR number
• ☐ Note your new IRS deadline: Feb. 8, 2027
• ☐ Report damage to your county
• ☐ Photograph and video damage before cleanup, if safe
• ☐ Save receipts, estimates, adjuster reports, and insurance letters
• ☐ File insurance claims promptly
• ☐ Gather proof of what you paid (closing statements, improvement receipts)
• ☐ Decide whether to claim the loss on your 2025 or 2026 return
• ☐ Uninhabitable 30+ days? File Form DR-465 by March 1, 2027
• ☐ Order replacement transcripts if records were lost

Hurricane Damage Tax Deduction FAQs

Is hurricane damage tax deductible in Escambia and Santa Rosa counties?

Yes, for personal-use property. Both counties are covered by EM-3655. Under today's rules, you'll need to itemize, and only the loss beyond $100 per casualty and 10% of your AGI counts.

Can I deduct Isaias damage if I take the standard deduction?

Not yet. That requires a major disaster declaration that covers your county.

Do I have to apply for the IRS deadline extension?

No. It's automatic if your address of record is in a covered county.

I don't live in a covered county. Can I still get the Feb. 8, 2027, deadline?

Possibly. If the records you need to meet a deadline are located in the covered area, such as with a tax professional there, you may qualify. It isn't automatic, though: call IRS Special Services at 866-562-5227 to request relief.

What if my county isn't on the list?

Counties can be added later. Keep your records, and talk with a tax professional before claiming personal-use damage. For tax years beginning after Dec. 31, 2025, the One Big Beautiful Bill Act also lets losses from a qualifying state-declared disaster count, but only if the governor requests it and the Treasury Secretary makes a determination, and only under the regular $100 and 10%-of-AGI rules, with no prior-year election.

Is FEMA or other disaster assistance taxable?

Generally, no. Qualified disaster relief payments for a federally declared disaster, such as payments for reasonable and necessary living or funeral expenses or home and contents repairs, are generally excluded from income under Sec. 139, to the extent insurance doesn't cover the same expenses. Payments for repairs or replacement also reduce your deductible loss.

We're Here When You're Ready

Recovering from a storm is exhausting, and nobody wants to untangle Form 4684 on top of it. Wondering what your Isaias loss means for your taxes? Take Flight Business Solutions can help.

Whether you're in Pensacola, Cantonment, Milton, Navarre, or anywhere else in the Panhandle, our virtual tax preparation and planning services can help you organize documents, compare current- and prior-year options, and claim the relief you qualify for. If the storm put your business books behind, our online bookkeeping and accounting team can help you catch up.

• Schedule a consultation: Contact Take Flight Business Solutions
• Call: (850) 303-2133

Related reading: Thinking about buying a business once things settle down? See my guide to using an SBA loan to buy a business.

Disclaimer: This article is general information only and is not tax, legal, or financial advice. Reading it does not create a client or engagement relationship with Take Flight Business Solutions LLC. Take Flight Business Solutions LLC is not a licensed CPA firm; services may be provided by licensed CPAs on our team. Disaster declarations and IRS relief can change after publication, and your situation may differ. Consult a qualified professional about your specific circumstances. Information is current as of October 16, 2026, based on FEMA declaration EM-3655-FL, IRS news release FL-2026-07, IRS Publication 547, and recently enacted federal and Florida law.