Senate passes disaster relief tax legislation
On December 4, 2024, the Senate passed, without opposition, the Federal Disaster Tax Relief Act of 2023 (H.R. 5863). The House passed the bill on a 382-7 vote back in May, but the legislation stalled in the Senate.
The legislation provides aid and tax relief to disaster victims from events dating back to December 2020. Here are the key points:
- Simplified loss deductions: Impacted taxpayers can claim losses from eligible disasters without needing to itemize deductions.
- No AGI threshold: The usual requirement that losses must exceed 10% of adjusted gross income (AGI) to qualify is removed on qualified disaster losses. Instead, disaster victims deduct casualty losses exceeding $500.
- Tax exemption on federal aid: Taxpayers who received certain payments due to wildfires after December 31, 2014, or due to the train derailment in East Palestine, Ohio, will not be required to pay income taxes on the aid received.
This legislation aims to ease the financial burden on those who have suffered due to these disasters.
Next steps to acquire disaster assistance
Impacted taxpayers should begin collecting documentation related to their expenses due to these disasters and any related insurance payments in preparation for claiming the related tax benefits.
In many cases, the filing of an amended income tax return will be recommended for claiming the qualified net losses for income tax purposes.
If you believe you qualify for these benefits or have any questions about how this may affect your tax situation, please reach out to your Wipfli representative or visit our tax webpage to contact us or learn more about our services.
