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

Casualty losses — the uninsured cost of damage from a fire, flood, or storm — have always been hard to deduct. You normally subtract $100 per loss, then subtract another 10% of your income, and you only get the deduction if you itemize. Most households take the standard deduction, so for them the relief usually never showed up.

For federally declared major disasters, Congress has repeatedly waived those limits, most recently in a 2020 disaster tax law and again in 2025. H.R. 5366 puts that treatment into the tax code for any major disaster whose FEMA incident period began between December 28, 2019, and the end of 2026. If you take the standard deduction, you can now add your qualified disaster loss on top of it, with no 10%-of-income cut. The per-loss floor for these disaster losses is $500 instead of $100.

The math can be large. Take a household earning $80,000 with $30,000 in uninsured disaster damage. Under the ordinary rules, it would lose $8,100 off the top and get nothing unless it itemized. Under this law it can deduct $29,500 while still taking the standard deduction — worth about $3,500 in federal tax at a 12% rate. These rules apply starting with 2025 tax returns.

The second half of the law covers wildfire survivors. Payments you receive to compensate for a federally declared wildfire — temporary housing, lost wages not paid by your employer, personal injury, a death in the family, emotional distress — are excluded from income, as long as insurance did not already cover the same loss. It reaches fires declared from 2015 through the end of 2026 and applies to payments received in 2026 or later. A settlement for uninsured wildfire losses is not taxed as income.

The trade-off: money excluded under the wildfire rule cannot also be deducted, used for a credit, or added to your property's tax basis. One tax break per dollar.