Special rules apply to Presidentially declared disaster area losses. A Presidentially declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Disaster Relief and Emergency Assistance Act.

This part discusses the special rules for when to deduct a disaster area loss and the abatement of interest on tax underpayments. For other special rules, see Publication 547.

When to deduct disaster area losses. If you have a deductible loss from a Presidentially declared disaster area, you can elect to deduct that loss on your return or amended return for the immediately preceding tax year. If you make this election, the loss is treated as having occurred in the preceding year.

Claiming a qualifying disaster loss on the previous year's return may result in a lower tax for that year, often producing or increasing a cash refund.

You must make this election to take your casualty loss for the disaster in the preceding year by the later of the following dates.

• The due date (without extensions) for filing your tax return for the tax year in which the disaster actually occurred.
• The due date (with extensions) for the return for the preceding tax year.

Interest abatement on underpayments in disaster areas. The IRS will abate interest for the length of the extension period granted to all taxpayers who meet both the following requirements.

1. They were located in an area declared a disaster area by the President.
2. They were granted extensions to file income tax returns and pay income tax.

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