Why it matters                        

Recovering from a natural disaster can be a long and expensive process. Tax relief can help, but previous rules limited who could benefit and, in the case of wildfire relief payments, when those payments could qualify for tax-free treatment.

The Doug LaMalfa Federal Disaster Tax Relief Certainty Act, signed into law on September 11, 2026, expands and extends certain tax benefits for disaster victims.

Here’s a closer look at what changed.

Important background: Personal Casualty Losses

Under Internal Revenue Code (IRC) section 165(c)(3) a casualty is defined as the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Examples include: earthquakes, car accidents, fires, floods, terrorist attacks, hurricanes, and tornadoes. 

Under the general tax rules, personal casualty losses from federally declared disasters were subject to certain limitations, including a requirement that losses exceed 10% of the taxpayer’s adjusted gross income (AGI).

Congress previously provided more favorable treatment for certain disasters occurring between December 28, 2019, and July 4, 2025. That special treatment expired for disasters occurring after July 4, 2025, leaving fewer taxpayers eligible for the more generous deduction.

What about wildfire relief payments?

Wildfire relief payments can take years to reach the individuals they are intended to help.

Under the Federal Disaster Tax Relief Act of 2023, certain qualified wildfire relief payments could be excluded from taxable income if the wildfire disaster declaration occurred after December 31, 2014, and the payment was received by December 31, 2025.

That deadline created a potential problem for taxpayers whose relief payments were delayed. A payment could arrive after the deadline even though it was intended to compensate the taxpayer for losses from a qualifying wildfire.

What is the Doug LaMalfa Federal Disaster Tax Relief Certainty Act?

President Trump signed the Doug LaMalfa Federal Disaster Tax Relief Certainty Act into law September 15, 2026, which brings changes to both personal casualty losses and wildfire relief payments.

Here’s what’s changing:

• More favorable treatment for disaster-related casualty losses. The law extends the more generous treatment of qualified personal casualty losses to qualifying disasters occurring before January 1, 2027. It also allows qualifying losses to be deducted without itemizing and removes the 10% AGI threshold that previously applied to these losses.
• No 10% AGI threshold for qualified net disaster losses. The special deduction is not subject to the usual 10% of AGI limitation.
• You don't have to itemize. The law allows the portion of the deduction attributable to a qualified net disaster loss to be claimed even if you don't itemize deductions.
• A higher per-casualty limitation. The law increases the per-casualty limitation from $100 to $500 for qualified disaster-related personal casualty losses.
• More flexibility for wildfire relief payments. Certain qualified wildfire relief payments can be excluded from taxable income when received, as long as the underlying federally declared wildfire disaster occurred after December 31, 2014, and before January 1, 2027.
• No double tax benefit. Taxpayers generally can't claim another deduction or credit for expenses or losses to the extent they were compensated by a tax-free wildfire relief payment.

These changes could provide additional tax relief for individuals and families still dealing with the financial impact of federally declared disasters and wildfires.