After the Fire

1. Ask for your full policy in writingRequest a complete copy — declarations page and every endorsement — by email, so there is a record. The declarations page lists your limits for the dwelling, other structures, personal property and loss of use.
2. Document before anything is clearedPhotograph and video the property from several angles. If a cleanup or debris-removal decision comes up later, that record may be the only one left.
3. Keep two sets of receiptsWhat you are spending now, and what your household normally spent before the fire. Reimbursement for temporary housing is generally measured by the increase, so both matter.
4. Follow up in writingWhen an adjuster, contractor or loan servicer tells you something that affects a decision, a short confirming email is worth the two minutes.

A homeowners policy is usually several separate coverages with separate limits — not one pot of money.

• Dwelling — the house itself
• Other structures — detached garage, shed, fence
• Personal property — belongings inside the home
• Loss of use — added costs while you are displaced
• Debris removal — clearing the site
• Ordinance or law — added cost of meeting current building code, where purchased

Not every policy includes every one of these, and limits differ. Your declarations page is the place to check.

Under many replacement-cost policies the insurer first pays actual cash value — the depreciated value of what was lost. A further amount, commonly called recoverable depreciation, may be released after an eligible repair or replacement is completed and documented.

That second portion is what the insurer may release once you complete and document an eligible repair or replacement. If the property is not replaced, you may not receive it. It is a conditional policy benefit — not a penalty, and not a tax.

Questions worth asking your carrier

• What documentation releases the recoverable depreciation?
• Is there a time limit for claiming it?
• Could buying a different home qualify as replacement?
• How is payment handled if the replacement costs less?

Loss-of-use coverage helps with the added cost of living somewhere else. It generally has both a dollar limit and a time limit, and both are set by your policy.

• Washington does not set a minimum period. Some states require a minimum number of months after a declared wildfire disaster. Washington does not, so the period is whatever your policy provides. Twelve months is common, though policies vary.
• A major rebuild can run longer than the limit. Permits, site clearing, design and contractor availability all take time. If yours may run past the coverage period, it is worth asking your carrier about an extension in writing early rather than late.
• The tax treatment follows the increase. These reimbursements are generally tax-free to the extent they reimburse the actual increase in living expenses caused by the displacement — which is why the two sets of receipts matter.

• The loan does not go away. The fire does not erase the mortgage, and the lien generally stays attached to the whole parcel, including the land. Payments continue unless the lender formally agrees otherwise.
• Your servicer may be a payee. Structural claim checks commonly name the mortgage servicer along with the owner. The servicer may release funds in stages as work is inspected, or — if the home is not rebuilt — apply proceeds to the loan.
• The land is still an asset. Dwelling coverage pays for the structure, not the lot. If the lot is later sold, the title or escrow company typically pays the mortgage balance at closing.
• If the numbers fall short. If insurance plus net land proceeds do not cover the payoff, you may need to bring cash or ask the lender to approve an alternative. Refinancing the land is not usually required simply to prepare it for sale.

Rebuild on the site

Often the clearest path to recovering available replacement-cost benefits, subject to policy limits and conditions. The land is retained and used. The servicer typically releases funds in stages as work is inspected.

Buy elsewhere

May qualify under some policies — the policy language controls. A carrier may limit payment to qualifying replacement expenditures, or to the covered cost to rebuild the original home. Land costs may be treated differently. Ask before committing.

Cash out

Federal tax law does not require reinvestment. The recoverable depreciation may not be paid if nothing is replaced. The lot may be sold or retained, subject to the lien.

Ask your carrier in writing how each path would be handled under your policy before choosing between them.

Insurance money is not automatically taxable. Gain is generally based on the proceeds compared with your adjusted tax basis — what you paid, plus qualifying improvements. Your basis is not your mortgage balance, and not your equity.

• Section 121 may permanently exclude up to $250,000 of gain for an eligible single homeowner, or $500,000 for an eligible married couple filing jointly. Eligibility rules apply.
• Section 1033 may allow deferral of any remaining gain if qualifying replacement property is acquired within the applicable period. It is optional — federal tax law does not require you to reinvest.
• Rental or business use, prior depreciation, land-sale timing, settlement allocation and any earlier use of Section 121 can all change the result.

These are set by different documents and different agencies, so they rarely line up. Putting them on one page is the simplest safeguard.

• Repair or replacement period — set by your policy. The window in which repair or replacement generally must be completed and documented for recoverable depreciation to be released.
• Loss-of-use end date — set by your policy. Both a dollar limit and a time limit.
• Section 1033 replacement period — applies only if you are deferring gain. Generally two years after the close of the tax year in which gain is realized; a longer period may apply for a main home in a federally declared disaster area. Confirm with a CPA.
• Destroyed-property claim with the county — generally three years. A claim may be filed with the county assessor for a reduction in assessed value and abatement of taxes.

Carriers generally ask for a list of personal property — what it was, roughly when it was bought, and what it would cost to replace. With no home to walk through, this usually takes longer than people expect, so starting early while memories are fresh helps.

• Work room by room, not category by category. Picture each room and write down what was in it, including closets and drawers.
• Use records you still have — phone photos, social media, online order histories, appraisals, and listing photos from when you bought the home.
• Ask how your carrier handles this. Some will advance a portion of the personal-property limit before a full itemized list is complete. It is worth asking whether yours will.
• Scheduled items are separate. Jewelry, firearms, art and collectibles listed individually on the policy are generally handled on their own terms.

Burned structures leave debris that has to be removed before rebuilding or selling. How that removal is paid for can affect the claim and later paperwork.

• Ask where the money comes from. Debris removal is sometimes an additional amount alongside the dwelling limit, and sometimes paid within it. Your policy determines which.
• Read any public cleanup offer closely. After large wildfires, a government program may offer to clear properties. These commonly involve a right-of-entry and may ask owners to assign insurance amounts designated for debris removal. Read the terms, and ask what happens to any remainder.
• Keep the paperwork separate. If both insurance and a public program pay toward the same work, that can raise a duplication question later.

Three different things get called a declaration, and they do different jobs.

• State and county emergency declarations — issued. Governor Ferguson declared a statewide emergency on August 1, 2026, and the Spokane County Board of Commissioners declared a county emergency the same day. These support the emergency response and can matter for some state and county programs.
• Fire Management Assistance Grants — approved. FEMA approved fire management assistance for several fires in the area. This helps reimburse firefighting costs. It is not a source of individual assistance, which is why "FEMA approved" in a headline does not mean money is coming to households.
• Federal emergency or major disaster declaration — requested. The Governor has requested a federal emergency declaration. A federal declaration can make certain FEMA assistance, SBA disaster loans and IRS relief available — depending on the declaration type, which counties are designated, which programs are authorized, and individual eligibility. It does not guarantee that every affected household receives assistance.

Do not wait on a federal declaration to start your insurance claim. Those run on separate clocks, and the insurance one starts now.

Raising any of these early usually leaves more options open. A CPA or attorney can tell you quickly whether they apply to you.

• Low or uncertain tax basis — long ownership, an inherited or gifted home, or records that were lost
• Past rental or home-office use — prior depreciation can affect how gain is calculated and taxed
• A possible shortfall — insurance plus land proceeds may not cover the mortgage payoff
• Scheduled valuables — jewelry, firearms, art and collectibles are generally handled separately
• Help from several sources — insurance, FEMA, grants and charitable help may need to be kept separate by purpose
• A later lawsuit or utility payment — these may have separate insurance and tax consequences. Keep the settlement allocation and have it reviewed before signing.

1. Collect every policy, in fullCommercial and landlord coverage often sits across more than one document. Ask your agent or carrier in writing for complete copies, including endorsements and declarations pages.
2. Document before anything is clearedPhotograph and video the site and, where safe, the equipment and inventory.
3. Start rebuilding your recordsBank statements, payroll reports, filed returns, depreciation schedules and profit-and-loss statements will all be asked for. Your bank, payroll provider, accountant and the IRS can supply copies.
4. Ask your lender how proceeds will be handledIf there is a mortgage on the property, the answer affects everything downstream. Get it in writing early.

Six questions to answer on paper

• What was damaged — building, equipment, inventory, tenant improvements, vehicles?
• What covers each one?
• What income stopped?
• Who controls the money?
• What is each asset's basis, after prior depreciation?
• Who needs to review what, and when?

• Building — the structure
• Business personal property — equipment, furniture, inventory
• Business income — net income while operations are interrupted
• Extra expense — costs of operating elsewhere
• Loss of rents — rent a landlord stops collecting
• Tenant improvements — build-out in leased space
• Ordinance or law — added cost of meeting current code
• Debris removal — clearing the site

Many commercial property policies include a coinsurance clause. Coinsurance can reduce a covered payment when the insured value falls below the required percentage. The policy formula, the loss amount, the valuation method and the stated limit all determine the result.

Two questions for your declarations page

• Is a coinsurance percentage shown?
• Is there an agreed value endorsement? Where purchased, one commonly suspends the coinsurance condition. Your agent or carrier can confirm what applies.

• The loan survives the building. A mortgage on commercial or rental property is unaffected by the loss. Payments generally continue unless the lender formally agrees otherwise.
• Proceeds may not come to you first. Loan documents commonly name the lender on insurance proceeds. The lender may hold funds and release them against inspections, or apply them to the balance.
• Ask before you plan around the money. Whether funds are released for reconstruction, applied to the loan, or handled some other way is a question for the lender and the loan documents — not an assumption.
• Get the answer in writing. Construction contracts, tenant commitments and relocation decisions all depend on it.

Property damage

• Pays toward the building, equipment, inventory and other property
• May be measured at replacement cost or actual cash value, depending on the policy
• Insurance proceeds above the adjusted basis of the property may create gain
• Deferral may be available under Section 1033 if qualifying replacement property is acquired

Interrupted income

• Business income coverage responds to net income lost while operations are interrupted, over a period the policy defines — which may not match how long you actually take to reopen
• Extra expense coverage may help with the cost of operating elsewhere
• Loss-of-rents coverage responds when a landlord stops collecting rent
• Business-interruption or lost-income proceeds are generally treated as taxable income

Depreciation claimed over the years reduces the adjusted basis of a property. A lower basis can increase the potential gain when insurance proceeds are received, even where the owner feels no better off than before.

Why the rate may differ

• Unrecaptured Section 1250 gain on real estate may be taxed at a maximum 25% federal rate
• Equipment and certain other property can create ordinary-income recapture under Section 1245
• Section 1033 and other tax attributes may change when and how gain is recognized
• Entity structure affects who reports the gain and how

Casualty gains and losses are generally calculated asset by asset. The overall result should be modeled by your tax professional before a settlement or election is finalized.

Repair or rebuild on the site

Often the clearest path to available replacement-cost benefits, subject to policy limits and conditions. Section 1033 deferral tends to be most straightforward. Usually the slowest, and income coverage may end before reopening.

Relocate the operation

May restore revenue sooner, which can limit the income loss. Whether a different site qualifies as replacement depends on the policy and, for tax, on Section 1033 rules. Confirm both treatments in writing before committing.

Sell or stop

Gain may be recognized rather than deferred, including amounts attributable to prior depreciation. Any unclaimed replacement-cost benefit may not be paid. Suspended losses and other attributes may be affected — worth asking about.

• Repair or replacement period — set by your policy
• Period of restoration — business income coverage generally runs over a defined restoration period rather than until the business actually reopens
• Section 1033 election and period — applies only if deferring. Generally two years after the close of the tax year in which gain is realized, with longer periods in some circumstances. Confirm with your CPA.
• Destroyed-property claim with the county — generally three years, and it can cover business personal property as well as buildings

• Loss of rents is its own coverage. It responds to rent that stops being collected while the property is unusable, for a period the policy defines. Confirm the time limit. These proceeds are generally treated as taxable income, in place of the rent they replace.
• The tenancy may be affected. Washington's Residential Landlord-Tenant Act (chapter 59.18 RCW) addresses uninhabitable premises, rent obligations and deposits. How it applies depends on the facts and the lease — worth a short conversation with a landlord-tenant attorney before writing to tenants.
• Your tenants' belongings are not your coverage. A landlord policy covers the building, not tenant contents — that would be renters insurance, which not every tenant carries. Sharing this page and the Insurance Commissioner's number costs nothing and gives them a place to start.

• Payroll during a closure. Some business income policies contemplate continuing payroll for a period, and some allow it to be extended. Check the policy before deciding what the business can sustain.
• Unemployment benefits. Employees who lose work because of the fire can generally file with the Washington Employment Security Department. Where a federal declaration authorizes it, additional disaster unemployment assistance may become available for some people who do not qualify for regular benefits.
• Employer payments to employees. In certain federally declared disasters, some employer payments to employees for living or repair costs may receive favorable tax treatment. The requirements are specific — ask your CPA before making payments.
• Records. Payroll providers, banks and the IRS can supply copies of records lost in the fire.

Yes. Losses on business or income-producing property are generally computed under different rules than losses on personal-use property, and are reported in a different section of the same form.

• Disaster declaration requirement — applies to personal-use property; generally does not apply to business or rental property
• $100 per-event reduction — applies to personal-use; generally does not apply to business
• 10% of adjusted gross income floor — applies to personal-use; generally does not apply to business
• Itemizing — generally required for personal-use; generally not for business
• Where reported — Form 4684 Section A for personal-use; Section B for business or rental

A business or rental casualty loss generally reduces business income in the same way as other business deductions. Whether it produces a benefit in a given year, and how it interacts with interrupted-income proceeds, depends on your overall position — there is no automatic offset.

• A long-held building — years of depreciation can turn a payout that feels like breaking even into a significant potential gain
• Property held in an entity — an LLC, partnership or S corporation affects who reports gain and who can elect deferral
• A coinsurance condition — worth confirming before accepting any settlement figure
• Equipment and fixtures — these can follow different recapture rules than the building
• Help from several sources — insurance, SBA lending, grants and any public cleanup program may need to be kept separate by purpose
• A later lawsuit or utility payment — these may have separate insurance and tax consequences. Keep the settlement allocation and have it reviewed before signing.