"The Internal Revenue Code contains a number of permanent disaster-related tax provisions. These include provisions providing that qualified disaster relief payments and certain insurance payments are excluded from income, and thus not subject to tax. Taxpayers are also able to deduct casualty losses and defer gain on involuntary conversions (an involuntary conversion occurs when property or money is received in payment for destroyed property). The Internal Revenue Service can also provide administrative relief to taxpayers affected by disasters by delaying filing and payment deadlines, waiving underpayment of tax penalties, and waiving the 60-day requirement for retirement plan rollovers. The availability of certain tax benefits is triggered by a federal disaster declaration. Before 2017, casualty losses were generally deductible. However, changes made in the 2017 tax revision (P.L. 115-97) restrict casualty loss deductions to federally declared disasters."
CRS In Focus, IF10730