New Law Provides Tax Relief for Victims of Major Disasters
On December 12, 2024, President Biden signed the Federal Disaster Tax Relief Act of 2023 (H.R. 5863) into law. This long-awaited favorable tax provision designated all presidentially declared disasters from January 1, 2020, to 60 days after enactment as “qualified” disasters, which allows some benefits to allow affected taxpayers to get deductions for their losses incurred in the disasters.
“Qualified” disasters allow taxpayers the following benefits:
- The requirement that personal casualties exceed 10% of adjusted gross income has been eliminated. Only the $500 floor applies per casualty.
- Personal casualty losses can be added to your standard deduction, as you are no longer required to itemize to deduct the casualty loss.
This favorable tax law affects the victims of Hurricane Ian and Idalia, from prior years, and all the major disasters that took place in 2024, including Hurricanes Debby, Helene and Milton. It also has provisions that provide relief to the California wildfire victims and the East Palestine train derailing victims.
It is very important to confirm on the FEMA website that a disaster was declared as a major disaster by the President under Section 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act to receive the special “qualified” disaster designation.
If you had a casualty loss or filed an insurance claim in a previous year due to a presidentially declared disaster, but did not qualify under the old law, please reach out to your tax professional as soon as possible so that an amended return can be filed. Time is of the essence for 2021 amended returns, since the statute of limitations will expire in 2025.
