Doug LaMalfa Federal Disaster Tax Relief Certainty Act
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The bill would extend and permanently codify the tax deduction for personal casualty losses in federally declared disaster areas, covering disasters with incident periods starting through the end of 2026, and would extend the income-tax exclusion for wildfire relief payments through 2026.
It matters because both tax breaks were set to expire or already lapse under current law, and letting them continue would keep disaster victims from facing added tax liability on relief payments and uninsured losses.
What this bill would do
What it would do
The bill would amend the Internal Revenue Code to codify and extend the special deduction rules for "qualified disaster-related personal casualty losses," covering losses in areas where a major disaster was declared with an incident period beginning on or after December 28, 2019, and before January 1, 2027. It would let individuals claim this loss deduction even if they do not itemize, and would keep the lower $500-per-casualty threshold for these disaster losses while resetting the general casualty-loss threshold to $100.
It would also create a new, permanent Internal Revenue Code section (139M) excluding "qualified wildfire relief payments" from gross income, covering forest or range fires declared a federal disaster after 2014 and before 2027, regardless of when the payment is received. It would bar taxpayers from also claiming a deduction, credit, or basis increase for expenses already covered by an excluded wildfire payment. The casualty-loss changes apply to tax years after 2024; the wildfire exclusion applies to payments received in tax years after 2025.
Key provisions
- 1Would codify and extend the qualified disaster-related personal casualty loss deduction to cover disasters with incident periods beginning before January 1, 2027
- 2Would allow individuals who do not itemize deductions to still claim the qualified net disaster loss deduction
- 3Would keep the $500-per-casualty threshold for qualified disaster losses while changing the general casualty-loss threshold to $100
- 4Would create new Internal Revenue Code section 139M excluding qualified wildfire relief payments from gross income for fires declared disasters between 2015 and 2026
- 5Would deny a double tax benefit by barring deductions, credits, or basis increases for expenses already covered by an excluded wildfire relief payment
Who would be affected
Individual taxpayers who suffer uninsured losses in federally declared disaster areas, and people who receive wildfire relief payments for losses, expenses, lost wages, injury, death, or emotional distress from forest or range fires declared federal disasters between 2015 and 2026. The Internal Revenue Service would administer the extended and codified rules.
Why it matters
Without this extension, the enhanced disaster casualty-loss deduction and the wildfire relief payment exclusion were tied to expiring statutory windows. Continuing them means affected individuals would not owe federal income tax on wildfire relief payments or lose the more generous casualty-loss deduction, reducing their tax burden after a disaster.
What would change
Changes to existing law
Amends 26 U.S.C. § 165(h) (Internal Revenue Code) (Sec. 2(a))
Adds a permanent special rule and extended definition of qualified disaster-related personal casualty losses through disasters beginning before 2027
Amends 26 U.S.C. § 63(b) (Internal Revenue Code) (Sec. 2(c))
Allows non-itemizers to claim the qualified net disaster loss deduction
Creates Internal Revenue Code (new Section 139M) (Sec. 3(a))
Creates a permanent exclusion from gross income for qualified wildfire relief payments tied to fires declared disasters 2015-2026
Repeals Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Public Law 116-260) and Public Law 119-21 (Sec. 2(d)(2))
Provides that these prior temporary disaster tax relief provisions no longer apply for taxable years beginning after December 31, 2024
Agencies directed to act
Effective dates
- Casualty loss deduction amendments apply to taxable years beginning after this date
- Wildfire relief payment income exclusion applies to payments received in taxable years beginning after this date
Funding and costs
Congressional Budget Office estimate
CBO estimates H.R. 5366 would reduce federal revenues by $408 million over the 2026–2036 period, increasing the deficit by the same amount.
The bill would reduce federal revenues by $408 million over the 2026–2036 period, with no effect on direct (mandatory) spending. The two main cost drivers are: (1) allowing taxpayers to deduct disaster-related casualty losses without itemizing, estimated to reduce revenues by $77 million; and (2) excluding from taxable income certain wildfire relief payments received after December 31, 2025, estimated to reduce revenues by $331 million. CBO notes that IRS administrative costs would increase by less than $500,000 over 2026–2031, subject to future appropriations. The bill contains no intergovernmental or private-sector mandates as defined under the Unfunded Mandates Reform Act.
How implementation would work
The Internal Revenue Service would apply the amended casualty-loss rules to tax returns for taxable years starting after 2024, and the new wildfire relief payment exclusion to payments received in taxable years starting after 2025. Taxpayers would claim the disaster loss deduction on their returns (itemized or as an add-on to the standard deduction), while payers and recipients of wildfire relief payments would need to determine eligibility based on whether the underlying fire was declared a federal disaster between 2015 and 2026. IRS guidance and forms would need updating to reflect the codified section 139M exclusion and the revised casualty-loss thresholds.
Legislative status & sources
Latest action
Received in the Senate and Read twice and referred to the Committee on Finance.
Official CRS summary
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This bill extends the federal tax deduction for qualified disaster-related personal casualty losses and the exclusion from gross income of qualified wildfire relief payments.
Under current law, unreimbursed personal casualty losses arising in a qualified disaster area (qualified disaster-related personal casualty losses) are deductible (as an itemized tax deduction or as part of the standard tax deduction) if such losses exceed $500 per casualty. A qualified disaster area is an area with respect to which a major disaster has been declared during the period beginning in 2020 and ending 60 days after July 4, 2025, if the incident period begins on or after December 28, 2019, and on or before July 4, 2025.
The bill extends the federal tax deduction for qualified disaster-related personal casualty losses by defining a qualified disaster area as an area with respect to which a major disaster has been declared if the incident period begins on or after December 28, 2019, and before January 1, 2027.
The bill provides that the exclusion from gross income of qualified wildfire relief payments applies to such payments attributable to forest or range fires declared a federal disaster after 2014 and before 2027, regardless of when such payments are received. (Currently, qualified wildfire relief payments attributable to forest or range fires declared a federal disaster after 2014 and received after 2019 and before 2026 may be excluded from gross income.)
The bill also provides statutory authority for several related tax rules.
Legislative subjects
Disaster relief and insurance; Fires; Forests, forestry, trees; Income tax deductions; Natural disasters; Taxation
Committee report
H. Rept. 119-605