HR 5366: Doug LaMalfa Federal Disaster Tax Relief Certainty Act

HR 5366 in plain English: This bill extends two disaster-related tax benefits: it allows taxpayers to deduct unreimbursed personal losses from federally declared disasters (with a $500 per-casualty threshold) through disasters beginning before January 1, 2027, and it excludes wildfire relief payments from taxable income for federally declared wildfires after 2014 and before 2027, regardless of when the payments are received.

Stated purpose

This bill extends and permanently writes into law two existing tax benefits for disaster victims: a deduction for personal property losses in federally declared disaster areas, and an exclusion from taxable income for wildfire relief payments received by individuals affected by qualifying wildfires.

Key points

• Extends the tax deduction for personal casualty losses in federally declared disaster areas through incidents beginning before January 1, 2027
• Losses must exceed $500 per casualty to qualify for the disaster-related deduction
• Wildfire relief payments from disasters declared after 2014 and before 2027 are excluded from taxable gross income
• Removes the prior requirement that wildfire payments be received before 2026 to qualify for the tax exclusion

Arguments supporters make

• Disaster and wildfire victims are already suffering major financial losses, and taxing their relief payments or denying deductions for destroyed property adds an unfair extra burden at the worst possible time.
• Writing these rules permanently into law gives families and tax preparers clear, predictable rules instead of temporary patches that expire and must constantly be renewed by Congress.
• Allowing non-itemizers to claim disaster loss deductions means lower- and middle-income disaster victims, who rarely itemize, can finally access the same tax relief as wealthier filers.

Arguments opponents make

• Repeatedly extending temporary disaster tax breaks without offsets reduces federal revenue and adds to the national debt, shifting costs onto future taxpayers rather than funding relief directly.
• Critics may argue that tax deductions and exclusions disproportionately benefit higher-income households who have more taxable income and larger losses to deduct, rather than targeting relief to those most in need.
• Defining eligible disasters only by when their incident period begins, rather than by need or severity, could create uneven treatment among disaster victims depending on timing rather than actual harm suffered.

Tradeoffs

Providing broader and more certain tax relief for disaster victims reduces federal tax revenue, creating a tension between helping individuals recover from catastrophic losses and maintaining funding for government programs; extending the benefit to non-itemizers broadens access but also increases the overall revenue cost.

Current status in Congress: Became law.

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