The Federal Disaster Tax Relief Act of 2025 provides tax relief to individuals affected by major disasters and wildfires. The bill modifies tax rules so that people who suffer losses from federally declared disasters occurring between July 2025 and January 2027 can deduct those losses more easily—by reducing the percentage of income threshold required to claim the deduction from the current standard to 10 percent for disaster-related losses. Additionally, the bill creates a new tax exclusion for wildfire relief payments received between 2026 and 2031, meaning individuals won't have to pay taxes on compensation they receive for losses, expenses, or damages caused by federally declared wildfires, as long as those losses aren't already covered by insurance. The legislation takes effect for losses incurred after December 31, 2024, and contains no specific funding amount—instead functioning as a tax code change that reduces tax liability for disaster victims.
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