New Federal Law Expands Tax Relief for Natural Disaster and Wildfire Victims
Washington, Monday, 21 September 2026.
Enacted on September 11, 2026, new federal legislation allows disaster victims to deduct losses over $500 without itemizing, retroactively eliminating the strict 10% income threshold.
Legislative Enactment and Timeline
On September 11, 2026, President Donald Trump signed the Doug LaMalfa Federal Disaster Tax Relief Certainty Act (H.R. 5366) into law, following Congressional passage in August 2026 [1][3]. This legislative action establishes expanded tax relief and provisions for individuals and businesses impacted by qualified natural disasters and wildfires across the United States [1]. The enactment provides crucial certainty for corporate tax planning and compliance strategies for entities operating in disaster-prone regions [1]. While the advisory from SingerLewak’s Tax Advisory Group was issued on September 21, 2026, the law itself became effective upon the President’s signature earlier in the month [1]. The Congressional Record Index confirms the enactment of H.R. 5366 through the 2026 legislative session [4].
Tax Provision Mechanics and Relief
The Act amends Internal Revenue Code Section 165(h) to allow taxpayers to deduct eligible personal casualty losses without the traditional 10% adjusted gross income (AGI) limitation for federally declared disasters occurring between December 28, 2019, and December 31, 2026 [1]. Under the new legislation, victims can deduct disaster losses exceeding $500 without itemizing, removing the previous requirement that losses exceed 10% of taxpayer income [2][3]. Additionally, the legislation creates Internal Revenue Code Section 139M, excluding qualified wildfire relief payments from gross income for federally declared wildfire disasters occurring between January 1, 2015, and December 31, 2026 [1]. These casualty loss changes apply retroactively to the 2025 tax year, potentially requiring amended returns and tax equalization adjustments for previous filings [3]. Eligibility for the exclusion of compensation for wildfire-related losses is now determined by the date of the disaster declaration, rather than the date payment is received [3].
Political Leadership and Intent
The legislation is named after Representative Doug LaMalfa, reflecting significant Republican [GPT] leadership in the House of Representatives [1]. President Donald Trump, a Republican [GPT], executed the signing ceremony, solidifying the administration’s commitment to disaster recovery support [1][2]. Ways and Means Committee Chairman Jason Smith, also a Republican [GPT], emphasized that helping families recovering from homes and churches should not be a partisan debate [2]. Chairman Smith noted that his committee previously passed the Disaster Related Extension of Deadlines Act into law in December 2025 to ensure postponed tax deadlines are honored for disaster victims [2]. The legislative intent focuses on reducing taxable income and expanding access to casualty loss deductions for those impacted by federally declared disasters [1].
Regional Impact and Implementation
In Missouri, three separate federal disaster declarations occurred in 2026, including tornadoes in April, storms in June, and flash floods in July [2]. On September 17, 2026, FEMA awarded $22.4 million in Public Assistance funding to the Perry County School District to rebuild Perryville High School, which was damaged by an EF2 tornado in 2025 [2]. Chairman Smith stated he pressed FEMA and the Secretary of Homeland Security, Markwayne Mullin, to ensure relief was received, though the text attributes the role of Secretary to Mullin [alert! ‘Source attributes role to Mullin, verification of current officeholder recommended’] [2]. Current legislation ensures all Missourians impacted by 2026 tornadoes, storms, and floods qualify for the new tax relief provisions [2]. Employers are advised to review mobility policies and coordinate payroll tax compliance to assist mobile employees in retaining documentation regarding casualty losses and insurance recoveries [3].