Federal Disaster Tax Relief Act of 2025

This bill would make many payments to people harmed by wildfires tax-free. If you receive money because of a federally declared wildfire disaster—like help for extra living costs, certain lost wages, injuries, a death in the family, or emotional distress—you would not have to count that money as income on your federal taxes, as long as insurance didn’t already cover it. This applies to wildfire disasters declared after the end of 2014, and only for payments you get in tax years 2026 through 2030 .

You can’t “double dip.” If a payment is tax-free under this bill, you can’t also claim a tax deduction or credit for the same expense, and you can’t raise the tax cost basis of property using those amounts .

• Who is affected: Individuals who receive payments due to losses from federally declared wildfires (forest or range fires) .
• What changes: These “qualified wildfire relief payments” wouldn’t be taxed as income; however, you can’t also claim deductions or increase property basis for the same amounts .
• When: Applies to payments received in tax years starting after December 31, 2025 and before January 1, 2031; covers disasters declared after December 31, 2014 .