Federal Tax Guide for Hilo and Hawaii Island
Hilo is in Hawaii County, where IRS relief after the May 2026 earthquake postponed many federal deadlines to Feb. 1, 2027. This page summarizes federal rules on postponed deadlines, casualty losses, rebuilding, rental repairs, and farm income, with links to the IRS sources.
Kurt Simmons, CPA is not licensed in Hawaii and does not provide CPA services to Hawaii clients. This page is general federal tax information, not tax advice.
Updated
Federal rules for disaster recovery, rental repairs, and farms
Earthquake relief: federal deadlines moved to Feb. 1, 2027
In release HI-2026-03 (Sept. 10, 2026), the IRS postponed various federal filing and payment deadlines falling on or after May 22, 2026 to Feb. 1, 2027 for individuals and businesses in Hawaii County, including estimated tax payments originally due on or after May 22, 2026. The release says the Feb. 1, 2027 date applies to 2025 individual returns on a valid extension but not to 2025 tax payments, and that this relief combines with the earlier March 2026 storm relief for Hawaii County (HI-2026-01). Information returns such as Forms W-2 and 1099 and employment tax deposits are generally not postponed. The IRS automatically identifies taxpayers in the covered area; affected taxpayers located outside it can call the IRS at 866-562-5227. Sources: IRS news release HI-2026-03, Hawaii County earthquake relief (Sept. 10, 2026); IRS news release HI-2026-01, Hawaii severe storms relief (April 10, 2026, updated May 12, 2026); IRS, Around the nation: Hawaii.
Casualty losses on personal-use property
For 2018 through 2025, a net personal casualty loss was generally deductible only when a federally declared disaster caused it. Beginning in 2026, the IRS says P.L. 119-21 also allows losses from state-declared disasters if all other requirements of section 165 are met. Personal-use losses are reduced by $100 per event and the total by 10% of adjusted gross income, and the loss is figured on Form 4684. The $500 qualified disaster loss rule, which needs no itemizing and no 10% reduction, applies only to major disasters declared from Jan. 1, 2020 through Sept. 2, 2025 with incident periods that began by July 4, 2025; it does not apply to the 2026 Hawaii County earthquake. Sources: IRS Topic No. 515, Casualty, disaster, and theft losses; IRS, Casualty loss deduction expanded and made permanent; IRS Publication 547 (2025), Casualties, Disasters, and Thefts.
Claiming a disaster loss in the prior year
In a federally declared disaster area, a disaster loss can be claimed on the return for the disaster year or the prior year. The election is due 6 months after the original due date of the disaster-year return, without extensions. The IRS asks filers to write 4936-DR on returns claiming earthquake losses and waives the usual fee for copies of prior returns requested on Form 4506 marked with that number (IRS news release HI-2026-03). For the August 2023 wildfires, the IRS gave the FEMA declaration number 4724-DR (IRS news release IR-2024-82). FEMA lists that disaster as declared Aug. 10, 2023, with an incident period of Aug. 8 to Sept. 30, 2023, which falls within the qualified disaster loss window in Publication 547: declared Jan. 1, 2020 through Sept. 2, 2025, with an incident period that began by July 4, 2025 and ended by Aug. 3, 2025. Sources: IRS news release HI-2026-03, Hawaii County earthquake relief (Sept. 10, 2026); IRS news release IR-2024-82, Hawaii wildfire relief (March 27, 2024); FEMA, Hawaii Wildfires (DR-4724-HI); IRS Publication 547 (2025), Casualties, Disasters, and Thefts.
If your home was destroyed
If insurance or other reimbursement for a destroyed main home produces a gain, you can generally exclude it as if you had sold the home: up to $250,000, or $500,000 if married filing jointly, if you owned and lived in it as your main home for at least 2 of the 5 years ending on the date it was destroyed. If the gain is larger and you buy replacement property, you may be able to postpone the rest; for a main home or its contents in a federally declared disaster area, the replacement period generally ends 4 years after the close of the first tax year in which any part of the gain is realized (IRS Publication 547). Certain qualified wildfire relief payments received from 2020 through 2025 are excludable from income (IRS wildfire relief FAQs). The IRS also explains how to rebuild records lost in a disaster (IRS). Sources: IRS Publication 547 (2025), Casualties, Disasters, and Thefts; IRS, Wildfire relief payments and casualty losses frequently asked questions; IRS, Reconstructing records after a natural disaster or casualty loss.
Repairs and improvements to rental property
Under the IRS tangible property regulations, an amount paid is treated as an improvement when it is a betterment, a restoration, or an adaptation to a new or different use; other costs are generally deductible repairs and maintenance. Replacing a major component or a substantial structural part is an example of a restoration. The same regulations treat amounts paid to restore damage for which the owner deducted a casualty loss or reduced basis for insurance proceeds as a restoration that must be capitalized, limited to the property's basis. Source: IRS, Tangible property final regulations.
Farm income and the hobby rules
A farming business reports income and expenses on Schedule F. If you do not farm to make a profit, the income goes on Schedule 1 and the expenses cannot be deducted, even if you itemize. A farm is presumed to be operated for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year; otherwise, the IRS weighs factors such as whether you run it in a businesslike manner, the time and effort you put in, and whether losses are normal for a start-up (IRS Publication 225). Net self-employment earnings of $400 or more are subject to self-employment tax. If at least two-thirds of your 2025 or 2026 gross income is from farming, you can make one estimated tax payment by January 15, 2027 (for taxpayers covered by the Hawaii County earthquake relief, release HI-2026-03 postpones estimated tax payments originally due on or after May 22, 2026 to Feb. 1, 2027), or none if you file and pay in full by March 1, 2027 (IRS Publication 505). Sources: IRS, About Schedule F (Form 1040); IRS Publication 225 (2025), Farmer's Tax Guide; IRS, How to tell the difference between a hobby and a business for tax purposes; IRS, Self-employment tax (Social Security and Medicare taxes); IRS Publication 505 (2026), Tax Withholding and Estimated Tax; IRS news release HI-2026-03, Hawaii County earthquake relief (Sept. 10, 2026).
Orchards, equipment and farm payroll
The 100% special depreciation allowance is restored for qualified property acquired and placed in service after January 19, 2025. You can also elect 100% special depreciation for specified plants planted or grafted after January 19, 2025: trees or vines that bear fruits or nuts, and other plants with more than one yield of fruits or nuts and a pre-productive period of more than 2 years. Elect by attaching a statement to the timely filed return for the year of planting or grafting (IRS Publication 225). Cash wages paid to a farmworker are subject to social security and Medicare taxes if you pay that worker $150 or more in cash wages for farmwork in the year, or if total wages to all farmworkers are $2,500 or more, with an exception for some seasonal hand-harvest workers paid less than $150. Farm employers report these taxes on Form 943 (IRS Publication 225). Sources: IRS Publication 225 (2025), Farmer's Tax Guide; IRS, About Form 943.
Outside the scope of this page
Hawaii state and county taxes are outside this page, which covers federal tax rules only.
Federal tax questions
Do I have to apply for the earthquake deadline postponement?
Generally, no. The IRS automatically identifies taxpayers located in the covered disaster area and applies filing and payment relief. If you were affected but live or have a business outside Hawaii County, the IRS says to call 866-562-5227. If you receive a late-filing or late-payment penalty notice for a due date inside the postponement period, call the number on the notice to have the penalty abated. Source: IRS news release HI-2026-03, Hawaii County earthquake relief (Sept. 10, 2026).
Which IRS form is used to figure a casualty loss?
Form 4684, Casualties and Thefts. For 2026 and later years, the IRS says a personal casualty loss may come from a federally declared or a state-declared disaster, if the other requirements are met. Sources: IRS, About Form 4684, Casualties and Thefts; IRS, Casualty loss deduction expanded and made permanent.
My farm has lost money for several years. Can I still deduct the losses?
It depends on whether you farm to make a profit. A farm that produced a profit in at least 3 of the last 5 tax years is presumed to be operated for profit. If it does not meet that test, the IRS considers all the facts, such as how you run the operation, the time you spend on it and whether losses are normal for a start-up. If the activity is not for profit, the expenses are not deductible. Sources: IRS Publication 225 (2025), Farmer's Tax Guide; IRS, How to tell the difference between a hobby and a business for tax purposes.
Are relief payments from the 2023 wildfires taxable?
Qualified wildfire relief payments received from January 1, 2020 through December 31, 2025 for a fire declared a federal disaster in 2015 or later can be excluded from income, to the extent the losses were not paid by insurance or other reimbursement. They include compensation for additional living expenses, lost wages other than wages your employer would have paid, personal injury or death, and emotional distress. You cannot also deduct or add to basis an expense those payments covered. Source: IRS, Wildfire relief payments and casualty losses frequently asked questions.