This bill helps disaster victims keep valuable tax credits after federally declared disasters reduce their income. When a disaster occurs in someone's area, their earned income often drops temporarily, which can cause them to lose eligibility for the Earned Income Tax Credit (EITC) and child tax credits. The bill allows affected individuals to "look back" and use their income from the year before the disaster when calculating these credits, preserving their tax benefits even if their disaster year income is lower. Married couples qualify if either spouse lived in the disaster area, and the IRS has authority to set the election process and deadlines. The changes take effect for tax years beginning after the bill is enacted, and the IRS can treat incorrect applications of the rule as minor clerical errors rather than tax violations, making compliance more flexible for struggling disaster victims.
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