Congress passed the Doug LaMalfa Federal Disaster Tax Relief Certainty Act, H.R. 5366, in August, and President Trump signed the bill into law on September 11.
The legislation makes two key changes to aid taxpayers impacted by disasters.
1. Exclusion of Qualified Wildfire Relief Payments
First, it adds IRC § 139M to allow individual taxpayers to exclude from their gross income amounts received as qualified wildfire relief payments.
The relief applies for federally declared wildfire disasters declared in 2015 through 2026.
2. Expanded Treatment of Personal Casualty Losses
Second, the legislation also revises IRC § 165(h) to allow individual taxpayers with a qualified net disaster loss in a tax year to exclude the net amount of personal casualty losses.
The law extends favorable treatment of casualty losses, which generally could only be excluded by itemizing taxpayers with losses exceeding 10% of their adjusted gross income.
The relief applies for disasters declared on December 28, 2019, through December 31, 2026, meaning taxpayers can deduct personal casualty losses from disasters during that time period without the 10% AGI limitation.
Key Provisions of H.R. 5366
Doug LaMalfa Federal Disaster Tax Relief Certainty Act:
- Extends the more generous treatment of personal casualty losses to disasters prior to January 1, 2027.
- Excludes wildfire relief payments from taxable income regardless of when they are received, so long as the wildfire disaster declaration occurs after December 31, 2014, and before January 1, 2027.
- As a result of this legislation, more taxpayers who have been harmed by disasters and wildfires will be eligible for these tax benefits.
Questions About This Tax Alert?
Please contact the Tax Advisory Group if you have any questions about this alert.
