Individuals may claim certain disaster losses and exclude wildfire aid from taxes

Individuals may include certain disaster losses when calculating a tax deduction, and may claim the eligible deduction without itemizing. This applies to individuals with eligible personal casualty losses tied to a qualifying major disaster. The special calculation applies to eligible losses after personal casualty gains are subtracted. The loss must come from a presidentially declared major disaster whose incident period began on or after December 28, 2019, and before January 1, 2027. These rules apply to tax years beginning after December 31, 2024.

Individuals may exclude qualifying wildfire relief payments from taxable income. This applies to individuals receiving compensation for wildfire losses, expenses, or damages from a federally declared disaster caused by a forest or range fire declared after December 31, 2014, and before January 1, 2027. The payment must compensate for losses, expenses, or damages caused by a qualifying federally declared forest or range fire, and only the portion not compensated by insurance or otherwise qualifies. The payment may cover living costs, lost wages paid by someone other than the employer who would have paid them, personal injury, death, or emotional distress. A person cannot claim a deduction or credit for an expense to the extent a payment for it is excluded, and the exclusion does not increase a property's tax basis. The exclusion applies to payments received in tax years beginning after December 31, 2025.