Federal Disaster Tax Relief Bill Awaits Presidential Signature to Extend Relief Rules Through 2026
Federal disaster tax relief legislation is moving to the president for signature following passage in the Senate. The Doug LaMalfa Federal Disaster Tax Relief Certainty Act, designated as H.R. 5366, has earned formal backing from the American Institute of CPAs. The measure extends special relief tax provisions for qualified disasters occurring after July 4, 2025, through December 31, 2026, codifying these rules directly into the Internal Revenue Code.
The legislation introduces several important modifications to how casualty losses are handled for federal tax purposes. First, it eliminates the requirement that personal casualty losses must exceed 10% of a taxpayer's adjusted gross income to qualify for a deduction. Second, taxpayers who choose the standard deduction rather than itemizing will be permitted to add qualified disaster losses directly to their standard deduction amount. To balance these expanded relief options, the legislation raises the deduction floor for qualified disaster losses from $100 to $500 per event.
In addition to casualty loss adjustments, the bill extends the exclusion of qualified wildfire relief payments from gross income through the end of 2026. A distinctive aspect of H.R. 5366 is its prospective application. While previous federal disaster tax packages were typically passed retroactively to address gaps after disasters had already occurred, this measure establishes tax rules ahead of time for future events occurring through late 2026.
For property owners and individual taxpayers facing qualified natural disasters, the practical implication is greater predictability and expanded access to tax relief. Property owners who suffer losses can preserve capital by reducing their tax liability without needing to itemize deductions or meet high income thresholds. Similarly, individuals receiving qualified wildfire compensation can exclude those amounts from federal taxable income through 2026.
Although the prospective codification provides clear guidance for upcoming tax years, accounting leadership stresses that temporary fixes leave long-term uncertainty. Daniel Hauffe, senior manager of tax policy and advocacy at the AICPA, observed that writing these provisions into tax law offers immediate consistency for affected individuals and businesses. However, the AICPA continues to urge lawmakers to enact permanent disaster tax relief to prevent recurring gaps once the current authorization period ends in 2026.
Source: Journal of Accountancy
