On December 12, 2024, President Biden signed into law the Federal Disaster Tax Relief Act of 2023 (H.R. 5863), providing tax relief for victims of various federally declared disasters. This legislation offers benefits to individuals and businesses affected by natural disasters, wildfires, and the East Palestine, Ohio train derailment.
Key Provisions of the Act
The Act extends relief for disasters declared from January 1, 2020, through February 9, 2025 (if declared by February 9, 2025), making them qualified disasters for tax purposes. This includes major events such as Hurricanes Helene, Milton, and Ian, as well as wildfires in Hawaii and California.
The Act opens the ability for taxpayers affected by these disasters to utilize simplified personal casualty loss deductions. Specifically, taxpayers can now claim disaster- related losses without itemizing deductions for these qualifying disasters. Additionally, the 10% adjusted gross income (AGI) threshold for casualty losses is eliminated for these qualifying disasters. Note, a $500 deductible per casualty event replaces the previous AGI limitation.
Finally, the Act also provides specific relief for wildfires and the East Palestine, Ohio train derailment. First, compensation for losses or damage from qualified wildfire disasters are now excluded from gross income. This applies to payments received between December 31, 2019, and January 1, 2026. Secondly, payments related to the February 3, 2023, train derailment are now treated as qualified disaster relief payments. These payments are excluded from gross income if provided by government agencies, Norfolk Southern Railway, or related entities.
Conclusion
For those affected by a federally declared disaster between 2020 and early 2025 or received relief payments for wildfires or the East Palestine train derailment, we recommend consulting with your Topel Forman advisor. These new provisions may allow for tax relief through amended returns or future filings.
