The 2026 Doug LaMalfa Federal Disaster Tax Relief Certainty Act
From Bob Jennings at TaxSpeaker. Check out more at taxspeaker.com
The 2026 Doug LaMalfa Federal Disaster Tax Relief Certainty Act signed into law on September 11th 2026 changes qualified disaster tax treatment to Federally declared disasters if the incident period of the disaster with respect to which such declaration is made begins on or after December 28th, 2019, and before January 1st, 2027. The Act also excludes wildfire relief payment from income if declared after 12/31/2014 and before 1/1/2027.
This law change specifically extends the “qualified disaster” special tax treatment through the end of 2026. It was originally scheduled to expire in mid-2025.
A qualified disaster area is any area for which the President has declared a major disaster under §401 of the Stafford Act, if the FEMA incident period for that disaster begins on or after December 28th, 2019 and before January 1st, 2027.
Taxpayers in qualified areas, for areas declared by December 31st, 2026, may claim the loss, after a $500 floor, in addition to itemized deductions but without applying the 10% casualty loss limit normally used. They may also still elect to take the loss on the prior year return.
Wildfire Relief Payments: §3 of the Act creates IRC §139M regarding wildfire payments. Gross income does not include any amount received by an individual as a qualified wildfire relief payment.
Qualified wildfire relief payment — any amount received by or on behalf of an individual as compensation for losses, expenses or damages incurred as a result of a qualified wildfire disaster, but only to the extent not compensated by insurance or otherwise. It includes compensation for additional living expenses, lost wages, personal injury, death and emotional distress.
Qualified wildfire disaster — any federally declared disaster, as defined in §165(i)(5)(A), declared after December 31, 2014 and before January 1, 2027 as a result of any forest or range fire.
Timing — the exclusion turns on the declaration date. The year the payment is received no longer matters, which is the point: wildfire settlements routinely pay out many years after the fire.
State Declared DisastersThe One Big Beautiful Bill Act (P.L. 119-21, July 4th, 2025) made a change to §165(h)(5) that takes effect for taxable years beginning after December 31st, 2025 and therefore land in the 2026 filing season.
§70109(a)(2) added state-declared disasters alongside federally declared disasters as qualifying events, with a new definition in §165(h)(5)(C).
A State declared disaster is any natural catastrophe — hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm or drought — or, regardless of cause, any fire, flood or explosion in any part of a State, which in the determination of both the Governor of that State (or the Mayor, in the case of the District of Columbia) and the Secretary of the Treasury causes damage of sufficient severity and magnitude to warrant applying the casualty loss rules. "State" includes the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa and the Northern Mariana Islands.
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