This act provides tax relief to disaster victims by allowing deductions for qualified disaster-related casualty losses for non-itemizers and excluding certain wildfire relief payments from gross income.
W. Steube
Representative
FL-17
The Doug LaMalfa Federal Disaster Tax Relief Certainty Act provides tax relief to individuals affected by federally declared disasters occurring between 2019 and 2027. The bill allows taxpayers to deduct qualified disaster-related casualty losses even if they do not itemize and excludes certain wildfire relief payments from gross income. These measures aim to reduce the financial burden on disaster victims by simplifying the deduction process and preventing the taxation of recovery compensation.
Federal Disaster Tax Relief Act Expands Deductions and Wildfire Payout Protections Through 2026
If you’ve ever lived through a wildfire or a major storm, you know the financial recovery is often as exhausting as the event itself. This bill is designed to take some of the sting out of tax season for survivors by changing the rules on how disaster losses and relief payments are handled by the IRS. Specifically, it targets major disasters declared between late 2019 and the start of 2027, ensuring that if you’re hit by a catastrophe, the tax code actually accounts for the hole in your wallet.
A Break for the Standard Deduction Crowd
Usually, if you want to deduct losses from a disaster—like a tree falling through your roof or a flood ruining your basement—you have to itemize your taxes. For the majority of us who just take the standard deduction, those losses typically provide zero tax benefit. This bill changes the game by allowing you to claim a "qualified net disaster loss" on top of your standard deduction (Sec. 2). It also removes the usual hurdle where you can only deduct losses that exceed 10% of your adjusted gross income. Under this new rule, the disaster loss itself isn't subject to that 10% limit, though the bill does raise the "floor" for disaster losses from $100 to $500—meaning the first $500 of the damage is on you, but the rest can directly lower your taxable income.
Keeping Wildfire Payouts in Your Pocket
For those dealing with the aftermath of a forest or range fire, the bill introduces Section 139M to the tax code. This provision ensures that if you receive a relief payment for things like extra living expenses (think hotel bills while evacuated) or lost wages because your workplace burned down, the IRS won't count that money as taxable income (Sec. 3). This applies to any federally declared wildfire disaster from 2015 through 2026. The logic is simple: if you’re being compensated for a loss, that money shouldn't be treated like a year-end bonus. However, there’s a "no double-dipping" rule—you can’t claim this tax exclusion if your insurance already covered the cost, and you can’t claim a tax credit for an expense you paid for using this tax-free relief money.
The Fine Print on Timing and Eligibility
This isn't a permanent change to the tax code, but rather a targeted extension. The disaster loss rules apply to tax years starting after December 31, 2024, while the wildfire income exclusions kick in for payments received after December 31, 2025. Because these benefits are tied to specific FEMA "incident periods," the timing of when a disaster is officially declared matters immensely. For a family rebuilding after a fire or a small business owner whose shop was wrecked by a hurricane, these provisions mean more of their recovery funds stay in their bank accounts rather than going toward a tax bill they can’t afford.