Congress extends tax breaks for disaster victims through 2027.
H.R. 5366 — Federal Disaster Tax Relief Act of 2025 · Filed by W. Steube (R-FL) · 14 cosponsors · Introduced Sep 15, 2025 · Passed both chambers
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What it does
This bill amends the tax code to allow individuals in federally declared disaster areas to deduct personal casualty losses from disasters (including wildfires) more generously than normal tax rules allow, and to exclude wildfire relief payments from taxable income. Specifically, it raises the threshold for deducting disaster losses from 10% of income to effectively 0% for 'qualified net disaster losses,' and it exempts compensation received for wildfire-related losses from being counted as income—benefiting disaster victims by reducing their tax burden.
Why we flagged it
The bill's core function is to provide tax relief to individuals affected by federally declared disasters and wildfires by loosening casualty loss deduction rules and excluding relief payments from income. This is straightforward disaster-assistance legislation.
What the text implies
- The bill's sunset date (January 1, 2027) means disaster relief provisions expire after 2026 tax year, requiring future congressional action to extend relief for disasters occurring after that date.
- The exclusion for wildfire relief payments applies only to amounts not already covered by insurance, creating potential disputes over what constitutes 'compensated by insurance or otherwise' and whether partial insurance coverage triggers the exclusion.
The full analysis lists 3 implications of this text.
Who stands to gain
individuals in federally declared disaster areas; wildfire victims receiving relief payments