Doug LaMalfa Federal Disaster Tax Relief Certainty Act
Officially: “Doug LaMalfa Federal Disaster Tax Relief Certainty Act” Read the full text
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1Short title
This section would let the Act be called the Federal Disaster Tax Relief Act of 2025.
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1. Short title This Act may be cited as the Federal Disaster Tax Relief Act of 2025 .
2Codification and extension of rules for casualty losses arising from major disasters
This section would change how personal casualty losses tied to major disasters are treated under the tax code. For an individual with a qualified net disaster loss in a tax year, the full amount of that disaster loss would count toward the casualty-loss deduction without being cut back by the usual rule that only allows a deduction for the part of a casualty loss above 10 percent of adjusted gross income; any other, non-disaster casualty losses (after subtracting the disaster loss already counted) would still have to clear that 10-percent-of-adjusted-gross-income threshold to be deductible. A qualified net disaster loss would be the amount by which qualified disaster-related personal casualty losses exceed personal casualty gains. Qualified disaster-related personal casualty losses would be losses (figured after the per-casualty dollar floor is applied) that happen in a qualified disaster area on or after the first day of the disaster's incident period and that are caused by that disaster. A qualified disaster area would be any area where the President has declared a major disaster under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, where the disaster's incident period begins after July 4, 2025 and before January 1, 2027. The qualified disaster would be the disaster that led to that declaration, and the incident period would be the period the Federal Emergency Management Agency specifies as when the disaster occurred. The section would also update a cross-reference in section 165(h)(5)(B)(ii) of the tax code so that provision also covers this new rule. This section would also change the per-casualty dollar floor used to figure a deductible casualty loss: currently a loss is not deductible unless it is above $500, reduced to $100 for taxable years beginning after December 31, 2009. Under the change, a loss would not be deductible unless it is above $100 in general, but for any net disaster loss the floor would instead be $500. This section would let people who claim the standard deduction, instead of itemizing, also claim a new disaster loss deduction on top of the standard deduction. That new disaster loss deduction would equal the excess of qualified net disaster losses over personal casualty gains, reduced by any portion of those gains already taken into account under section 165(h)(5)(B)(i). This section would also add an exception for the new disaster loss deduction to the alternative minimum tax rule that otherwise applies to the section 63(c) standard deduction, so the disaster loss deduction would be treated differently from the rest of the standard deduction when the alternative minimum tax is figured. These changes would apply to losses incurred in taxable years beginning after December 31, 2024.
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2. Codification and extension of rules for casualty losses arising from major disasters (a) Treatment of losses (1) In general Section 165(h) of the Internal Revenue Code of 1986 is amended by adding at the end the following new paragraph: (6) Special rule for qualified disaster losses (A) In general If an individual has a qualified net disaster loss for any taxable year, the amount determined under paragraph (2)(A)(ii) shall be the sum of— (i) such net disaster loss, and (ii) so much of the excess referred to in the matter preceding clause (i) of paragraph (2)(A) (reduced by the amount in clause (i) of this subparagraph) as exceeds 10 percent of the adjusted gross income of the individual. (B) Qualified net disaster loss For purposes of subparagraph (A), the term qualified net disaster loss means the excess of qualified disaster-related personal casualty losses over personal casualty gains. (C) Qualified disaster-related personal casualty losses (i) In general For purposes of this subsection, the term qualified disaster-related personal casualty losses means losses described in subsection (c)(3) (determined after application of paragraph (1)) which arise in a qualified disaster area on or after the first day of the incident period of the qualified disaster to which such area relates, and which are attributable to such disaster. (ii) Qualified disaster area The term qualified disaster area means any area with respect to which a major disaster has been declared by the President under section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act if the incident period of the disaster with respect to which such declaration is made begins after July 4, 2025, and before January 1, 2027. (iii) Qualified disaster The term qualified disaster means, with respect to any qualified disaster area, the disaster by reason of which a major disaster was declared with respect to such area. (iv) Incident period For purposes of this paragraph, the term incident period means, with respect to any qualified disaster, the period specified by the Federal Emergency Management Agency as the period during which such disaster occurred. . (2) Conforming amendment Section 165(h)(5)(B)(ii) of such Code is amended by inserting or (6) after paragraph (2)(A) . (b) Dollar limitation Section 165(h)(1) of the Internal Revenue Code of 1986 is amended by striking $500 ($100 for taxable years beginning after December 31, 2009) and inserting $100 ($500 in the case of any net disaster loss to which paragraph (3) applies) . (c) Standard deduction (1) In general Section 63(c)(1) of the Internal Revenue Code of 1986 is amended by striking and at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting and , and by adding at the end the following new subparagraph: (C) the disaster loss deduction. . (2) Disaster loss deduction Section 63(c) of such Code is amended by adding at the end the following new paragraph: (8) Disaster loss deduction For the purposes of paragraph (1), the term disaster loss deduction means the excess of qualified net disaster losses (as defined in section 165(h)(6)(B)) over the amount of personal casualty gains (as defined in section 165(h)(3)(A)) reduced by any portion of such gains taken into account under section 165(h)(5)(B)(i). . (d) Treatment under alternative minimum tax Section 56(b)(1)(D) of the Internal Revenue Code of 1986 is amended by inserting (other than the disaster loss deduction) after section 63(c) . (e) Effective date The amendments made by this section shall apply to losses incurred in taxable years beginning after December 31, 2024.
3Codification and extension of exclusion from gross income of compensation for losses or damages resulting from certain wildfires
This section would add a new section, 139M, to the part of the tax code listing income excluded from gross income. Under new section 139M, an individual's gross income would not include any amount received as a qualified wildfire relief payment. A qualified wildfire relief payment would be any amount received by or on behalf of an individual as compensation for losses, expenses, or damages, including additional living expenses, lost wages other than wages the person's employer would have otherwise paid, personal injury, death, or emotional distress, resulting from a qualified wildfire disaster, but only to the extent that the loss, expense, or damage is not already compensated by insurance or another source. A qualified wildfire disaster would be any federally declared disaster, as already defined in section 165(i)(5)(A) of the tax code, that happens after December 31, 2014, as a result of a forest or range fire. The section would deny a double benefit: no deduction or credit would be allowed for an expenditure to the extent it was covered by an excluded wildfire relief payment, and no increase to the basis or adjusted basis of any property would result from an amount excluded under this section. New section 139M would apply only to qualified wildfire relief payments an individual receives in taxable years beginning after December 31, 2025, and before January 1, 2031. This section would also add a listing for new section 139M to the tax code's table of sections for that part of the law. The changes made by this section would apply to payments received in taxable years beginning after December 31, 2025.
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3. Codification and extension of exclusion from gross income of compensation for losses or damages resulting from certain wildfires (a) In general Part III of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting before section 140 the following new section: 139M. Compensation for losses or damages resulting from certain wildfires (a) In general Gross income shall not include any amount received by an individual as a qualified wildfire relief payment. (b) Definitions; qualified wildfire relief payment For purposes of this section— (1) In general The term qualified wildfire relief payment means any amount received by or on behalf of an individual as compensation for losses, expenses, or damages (including compensation for additional living expenses, lost wages (other than compensation for lost wages paid by the employer which would have otherwise paid such wages), personal injury, death, or emotional distress) incurred as a result of a qualified wildfire disaster, but only to the extent the losses, expenses, or damages compensated by such payment are not compensated for by insurance or otherwise. (2) Qualified wildfire disaster The term qualified wildfire disaster means any Federally declared disaster (as defined in section 165(i)(5)(A)) after December 31, 2014, as a result of any forest or range fire. (c) Denial of double benefit Notwithstanding any other provision of this title— (1) no deduction or credit shall be allowed (to the person for whose benefit a qualified wildfire relief payment is made) for, or by reason of, any expenditure to the extent of the amount excluded under this section with respect to such expenditure, and (2) no increase in the basis or adjusted basis of any property shall result from any amount excluded under this section with respect to such property. (d) Limitation on application This section shall only apply to qualified wildfire relief payments received by the individual during taxable years beginning after December 31, 2025, and before January 1, 2031. . (b) Clerical amendment The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting before the item related to section 140 the following new item: Sec. 139M. Compensation for losses or damages resulting from certain wildfires. . (c) Effective date The amendments made by this section shall apply to payments received in taxable years beginning after December 31, 2025.
Where it is
In the House.