Sponsors (9)
The bill gives targeted, near-term tax-free treatment for wildfire relief payments to reduce the financial burden on uninsured disaster survivors, but it limits other tax benefits, may reduce future property basis adjustments, and creates administrative and temporal limits to the relief.
People affected by federally declared wildfires (taxpayers, homeowners, low-income individuals) can exclude compensated wildfire relief payments from taxable income, reducing their federal tax burden for disaster-related losses.
People receiving payments for additional living expenses, lost wages, personal injury, death, or emotional distress get those payments tax-free, increasing the net value of the aid they receive.
Relief is targeted to uncompensated losses (payments that cover losses not reimbursed by insurance), focusing benefits on those without other recovery means.
Taxpayers who exclude these payments cannot claim deductions or credits for the same expenses, which may complicate tax planning or reduce other tax benefits for affected individuals.
Excluded amounts cannot increase the basis of property, potentially reducing future loss or depreciation deductions when property is sold or a future loss is claimed.
The exclusion is temporary (applies to payments made after 12/31/2025 and ends after 12/31/2032), so future disaster survivors may not receive the same tax relief.
Based on analysis of 2 sections of legislative text.
Excludes qualified wildfire relief payments for uninsured losses from gross income, effective for amounts received after Dec 31, 2025, with a phase-out after Dec 31, 2032.
Introduced September 9, 2025 by Doug Lamalfa · Last progress September 9, 2025
Excludes certain disaster payments made to individuals for losses, expenses, or damages from federally declared forest or range fires from taxable income, but only for amounts not otherwise compensated by insurance or other means. The exclusion applies to qualified wildfire relief payments received after December 31, 2025, is limited to fires declared after December 31, 2014, disallows related double tax benefits, and begins phasing out after December 31, 2032. The change adds a new targeted tax rule to the Internal Revenue Code to reduce the tax burden on people who receive government or relief payments for wildfire-related losses, while preventing taxpayers from claiming both the exclusion and related deductions or basis increases for the same amounts.