Sponsors (32)
The bill provides targeted, short-term tax and administrative relief to disaster-affected households, donors, and governments—boosting immediate cash flow, liquidity, and recovery resources—while increasing near-term federal revenue costs, adding compliance complexity, and producing uneven access to benefits across individuals and states.
Low-income taxpayers and families in qualified disaster areas can use prior-year earned income or prior-year income to increase 2025 EITC and Child Tax Credit amounts, boosting refunds or reducing taxes during recovery.
Disaster-affected individuals can access retirement-plan relief (penalty-free distributions up to $100,000, larger loan limits, delayed repayments, ability to repay/rollover within three years, and option to spread tax on distributions over three years) to provide immediate liquidity for recovery.
Individuals who incur disaster-related personal casualty losses can deduct those losses by increasing their standard deduction (with the post‑2009 floor lowered from $500 to $100), reducing taxable income for the year of the loss.
Multiple provisions (tax substitutions, expanded deductions, LIHTC increases, and income exclusions) reduce federal revenues or increase near-term outlays, which could raise budgetary pressure or contribute to higher deficits.
Permitting penalty-free withdrawals, larger loans, and delayed repayments from retirement accounts risks reducing long-term retirement savings for individuals who do not fully recontribute, potentially increasing future financial insecurity.
The bill creates new or altered elections, documentation rules, timing windows, and reporting exceptions across tax and retirement provisions, increasing compliance burdens for taxpayers, nonprofits, plan administrators, employers, and the IRS.
Based on analysis of 8 sections of legislative text.
Provides targeted, time-limited tax relief for people in certain declared disasters: EITC/CTC earned-income substitution, special charitable and casualty-loss rules, penalty-free retirement distributions, and LIHTC boosts.
Introduced December 18, 2025 by Judy Chu · Last progress December 18, 2025
Provides temporary tax relief for people affected by federally declared disasters starting late 2024 and declared in early 2025 by adjusting several tax rules. Key relief includes letting eligible taxpayers use prior-year earned income to compute the Earned Income Tax Credit and Child Tax Credit, special charitable-deduction and food-donation rules, penalty-free limited retirement-plan distributions with rollover/repayment options, more favorable casualty-loss treatment that raises the standard deduction for disaster losses, and temporary increases to state low-income housing credit caps for projects in disaster zones.