New federal disaster tax law expands relief for wildfire victims

President Donald Trump signed the Doug LaMalfa Federal Disaster Tax Relief Certainty Act into law on Sept. 11, expanding federal tax breaks for people hit by qualifying disasters and wildfires. The law excludes certain wildfire relief payments from income and broadens casualty-loss deductions for eligible disaster victims through 2026.

Why it matters: - The law is designed to reduce the tax burden on individuals and families recovering from federally declared disasters and wildfires. - The changes can lower taxable income and expand access to casualty-loss deductions for eligible taxpayers. - Taxpayers affected by qualifying events may want to review whether they now qualify for new federal tax benefits.

What happened: - Congress passed the Doug LaMalfa Federal Disaster Tax Relief Certainty Act in August. - President Donald Trump signed the bill into law on Sept. 11, 2026. - SingerLewak's Tax Advisory Group is alerting taxpayers to the new federal relief provisions.

The details: - The law creates new Internal Revenue Code Section 139M, which lets individual taxpayers exclude qualified wildfire relief payments from gross income. - That exclusion applies to federally declared wildfire disasters occurring after Dec. 31, 2014, and before Jan. 1, 2027. - Qualified wildfire relief payments are not subject to federal income tax, regardless of when the payments are received, as long as the disaster declaration falls within that period. - The law also amends Internal Revenue Code Section 165(h) to expand tax relief for disaster-related personal casualty losses. - Taxpayers with qualified net disaster losses can deduct eligible personal casualty losses without the 10% adjusted gross income limitation that has typically applied. - The expanded casualty-loss relief applies to federally declared disasters occurring between Dec. 28, 2019, and Dec. 31, 2026. - The act extends enhanced tax treatment for personal casualty losses related to qualified disasters occurring before Jan. 1, 2027. - The legislation broadens access to tax benefits for taxpayers impacted by disasters and wildfires.

Between the lines: - The biggest shift is that some wildfire relief payments will now be treated more favorably under federal tax law. - Removing the 10% AGI threshold can make casualty-loss deductions more usable for taxpayers who might not have benefited under prior rules. - The timing suggests Congress aimed to cover both older wildfire events and more recent disaster declarations. - SingerLewak's Tax Advisory Group said the changes represent a significant expansion of federal tax relief and may create tax-saving opportunities for eligible taxpayers.

What's next: - Taxpayers affected by federally declared disasters during the covered periods should evaluate whether their losses or relief payments qualify. - Tax professionals may need to review filing positions for disaster-related deductions and income exclusions under the new law. - Eligible taxpayers could see benefits when filing current or amended returns, depending on their circumstances.

The bottom line: - The new law broadens federal tax relief for disaster survivors, with the most immediate impact likely on wildfire-related payments and casualty-loss deductions.