HR 5366: Doug LaMalfa Federal Disaster Tax Relief Certainty Act

HR 5366 in plain English: This bill extends two disaster-related federal tax benefits: a deduction for unreimbursed personal losses from federally declared disasters (covering incidents from December 28, 2019 through the end of 2026), and an exclusion from taxable income for wildfire relief payments tied to federally declared forest or range fires after 2014 and before 2027. Disaster-related personal casualty losses must exceed $500 per casualty to qualify for the deduction.

Stated purpose

This bill extends the federal tax deduction for personal losses caused by major disasters and makes wildfire relief payments tax-free for a longer period, providing more certainty about these tax rules for disaster victims.

Key points

• Extends the tax deduction for personal losses from federally declared disasters through incidents beginning before January 1, 2027
• Disaster-related personal casualty losses must exceed $500 per casualty to be deductible
• Extends the income tax exclusion for wildfire relief payments for fires declared federal disasters after 2014 and before 2027
• Removes the prior deadline requiring wildfire relief payments to be received before 2026, allowing exclusion regardless of when payments are received

Arguments supporters make

• Disaster victims are already suffering serious losses, and extending these tax breaks ensures they are not also hit with an unexpected tax burden on money they receive just to recover.
• Making these rules permanent in the tax code gives affected families and communities predictability so they can plan their finances without worrying about the relief expiring.
• Allowing non-itemizers to claim disaster loss deductions means lower- and middle-income victims, who are less likely to itemize, get the same help as wealthier taxpayers.

Arguments opponents make

• Extending targeted tax breaks for specific disasters adds complexity to the tax code and may benefit some disaster victims more than others depending on whether their disaster qualifies.
• The cost of these tax exclusions and deductions reduces federal revenue, and critics may argue that direct spending programs could deliver help to disaster victims more efficiently or equitably.
• Setting a cutoff date of January 1, 2027 means Congress will likely need to revisit and extend these provisions again, creating recurring uncertainty rather than a lasting solution.

Tradeoffs

Providing tax relief to disaster and wildfire victims reduces federal tax revenue, shifting some of the financial burden of recovery onto the broader public; at the same time, without this relief, the burden falls entirely on individuals already dealing with major losses.

Current status in Congress: Passed both chambers.

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