Sponsors (15)
The bill increases and clarifies tax relief for disaster and wildfire survivors (including non-itemizers and some past disaster victims) but does so at the cost of lost federal revenue, added compliance complexity, limits on stacking other tax benefits, and delayed relief for some recipients.
People in presidentially declared disaster areas (including non-itemizers) can get bigger, clearer tax relief for casualty losses — qualified net disaster losses can be deducted above the 10% of AGI threshold and a portion can be taken by non-itemizers as part of standard deduction calculations, with definitions clarified to reduce ambiguity.
Individuals affected by federally declared forest or range wildfires (including homeowners, renters, and low-income survivors) can exclude uncompensated relief payments — covering living expense assistance, lost wages, personal injury and emotional-distress payments — from taxable income, and the rule is written to apply retroactively to many past wildfire declarations.
The bill clarifies key terms (like 'qualified disaster area' and 'incident period'), helping taxpayers and the IRS apply and administer disaster-related tax rules more consistently.
Expanding disaster-related deductions and excluding certain disaster relief payments reduces federal tax revenue, which could increase the deficit or require offsets that affect other government spending or taxes.
Taxpayers and insurers will face added compliance and administrative burdens to substantiate losses, prove timing and attribution to FEMA incident periods, and coordinate insurance offsets to determine taxable treatment.
Relief payments that are excluded from income cannot also be claimed as deductible losses or used to increase tax basis, which may reduce other tax benefits for some recipients (e.g., homeowners who would otherwise claim casualty deductions or basis adjustments).
Based on analysis of 3 sections of legislative text.
Modifies casualty-loss deduction rules for covered major disasters and excludes certain wildfire relief payments from gross income for uncompensated wildfire losses.
Creates two targeted tax relief changes for people hit by federally declared disasters. First, it changes how personal casualty losses from major disasters (declared under the Stafford Act, incident periods 12/28/2019–12/31/2026) are computed so more of those losses can be used against taxable income and allows non-itemizers to claim the disaster portion of that deduction. Second, it makes certain wildfire relief payments tax-free by excluding qualifying payments received for wildfire losses from gross income (with limits to prevent double tax benefits). The provisions take effect in stages for taxable years beginning after Dec 31, 2024 (casualty loss rule) and for payments received in tax years after Dec 31, 2025 (wildfire exclusion).
Official title: Doug LaMalfa Federal Disaster Tax Relief Certainty Act
Introduced September 15, 2025 by W. Greg Steube · Last progress April 28, 2026