The Doug LaMalfa Federal Disaster Tax Relief Certainty Act (HR5366) was signed into law on 9/11/26 and has three key features:
Qualified Wildfire Relief Payments now based on when the disaster occurred, not when the taxpayer received the payment
- Under the old law, if you received a qualified wildfire relief payment between 1/1/2020 and 12/31/25, you could exclude it from gross income.
- Under the new law (§139M), the time limit is based on when the disaster was declared and not based on when you received the payment. So, now, a qualified wildfire disaster is one that was declared between 1/1/15 and 12/31/26. So if you receive a payment after 12/31/25 for any of those disasters it will be excluded from gross income, even if you receive the payment years from now.
Change to what qualifies as a qualified disaster for disaster loss deductions (§165(h)(6))
- For qualified disaster losses, the deductible amount is calculated without regard to the 10% AGI limitation and applies a $500 floor.
- For tax years starting on 1/1/25, a qualified disaster is one where the incident period began between 12/28/19 to 12/31/26.
Changes to where the disaster loss is claimed (§63(b)(8) )
- In the past, the loss for non-itemizers was added to the standard deduction so it could impact Alternative Minimum Tax (AMT). Now the deduction is taken separately so it will not impact AMT.
- This begins for tax years starting 1/1/25.