H.R. 5366 — Doug LaMalfa Federal Disaster Tax Relief Certainty Act

This section codifies special tax treatment for qualified disaster-related personal casualty losses (i.e., losses attributable to a major disaster declared by the President under the Stafford Act in a qualified disaster area during an incident period beginning on or after December 28, 2019, and before January 1, 2027). (As background, under current law, individuals may deduct personal casualty losses as itemized deductions only to the extent they exceed both $100 per casualty and 10% of adjusted gross income (AGI), with deductions generally limited to losses from federally declared disasters.) Specifically, the section (1) waives the 10% AGI limitation for any qualified net disaster loss (i.e., excess of qualified disaster-related personal casualty losses over certain personal casualty gains) and applies the limitation only to any remaining excess loss; (2) sets the per-casualty dollar floor at $100 generally and $500 for qualified disaster-related personal casualty losses (from $100 for taxable years beginning after December 31, 2009); and (3) allows an above-the-line deduction (i.e., available whether or not the taxpayer itemizes) for the qualified net disaster loss. The changes apply to taxable years beginning after December 31, 2024, superseding temporary relief provisions from prior laws. (Thus, affected taxpayers may claim these more favorable rules for losses from disasters such as COVID-19-related events, wildfires, hurricanes, and floods through 2026 incident periods.)

This section establishes an exclusion from gross income for qualified wildfire relief payments received by individuals in taxable years beginning after December 31, 2025. A qualified wildfire relief payment is any amount received as compensation for losses, expenses, or damages—including additional living expenses, lost wages (other than employer-paid wages), personal injury, death, or emotional distress—incurred as a result of a qualified wildfire disaster (i.e., a federally declared disaster due to a forest or range fire with a declaration date after December 31, 2014, and before January 1, 2027), but only to the extent not compensated by insurance or otherwise. (Thus, no deduction, credit, or basis adjustment is allowed for any amount excluded under this provision.)