New Disaster Tax Relief Laws: What Congress Has Passed

TL;DR - Congress has enacted targeted disaster tax relief laws in certain years, including H.R. 5863 (118th Congress). Relief depends on the specific Act passed and IRS guidance issued afterward.

In recent years, disaster tax relief laws have helped individuals and businesses recover after major disasters. From hurricanes and wildfires to industrial accidents, Congress has stepped in with targeted tax relief when standard IRS relief wasn’t enough.

Each new law builds on prior legislation, such as expanding deductions, extending filing deadlines, and excluding certain disaster reimbursements from income. Many of these updates are part of legislation, such as the Federal Disaster Tax Relief Act of 2023 (Public Law 118-148), which extends qualified disaster-loss tax rules to federally declared disasters.

This guide explains how these laws work in practice—how Congress enacts them, how the IRS administers them, and what taxpayers need to know to claim all available forms of disaster tax relief. Let’s begin.

📌 Learn more in our Disaster Tax Relief Pillar Guide.

How Congress Creates and Passes Disaster Tax Relief Acts

When natural disasters strike—such as wildfires, hurricanes, floods, and industrial accidents—Congress often responds with disaster tax relief legislation to support affected individuals and businesses. These laws go beyond FEMA declarations and IRS announcements, introducing special tax provisions that:

• Extend federal tax filing deadlines and payment extensions.
• Allow deductions for casualty losses and qualified disaster losses not covered by insurance.
• Exclude certain reimbursements and payments from gross income.
• Allow qualified disaster distributions from retirement accounts without the 10% early withdrawal penalty, subject to specific dollar limits and repayment rules.
• Exclude certain qualified disaster relief payments from gross income, including payments for reasonable and necessary personal, family, living, or funeral expenses.

Navigating New Disaster Tax Relief Laws

📖 Pro Tip: Congress.gov maintains a full list of such disaster bills—search by keyword like “disaster tax relief” or “qualified disaster.”

⚠️ Important: These benefits apply only when a major disaster is declared by the President and confirmed by FEMA.

📝 Check our Disaster Relief Options Guide to compare filing extensions, deductions, credits, and qualified disaster loss rules—all in one place.

Disaster Tax Relief Laws Timeline (2017–2025)

Congressional disaster relief laws have undergone rapid evolution in the past decade. Here's a timeline of the most impactful acts:

2017 – Disaster Tax Relief and Airport and Airway Extension Act

Created qualified disaster losses, waived the 10% AGI rule, and allowed early retirement withdrawals for affected taxpayers.

2020 – Taxpayer Certainty and Disaster Tax Relief Act

Applied to 2018–2020 disasters; offered adjusted basis deductions, extended tax deadlines, and tax-free qualified disaster relief payments.

2021 – American Families and Disaster Relief Act

Supported disaster victims in pandemic zones and wildfire-affected areas through targeted relief provisions.

2023 – HR 5863: Disaster Tax Relief Act of 2023

Provided federal tax relief for wildfire victims, including qualified wildfire relief payments and casualty loss deductions.
Also covered East Palestine train derailment victims under expanded federal disaster tax relief.

2024–2025 – Pending Legislation

Proposes new disaster tax relief bills addressing Hurricane Ian, flooding in Illinois and South Carolina, and the expansion of federal disaster tax relief programs.

Note: Starting in 2026, qualified wildfire relief payments are taxable even if the wildfire occurred during the eligible year. Through December 31, 2025, these payments had been tax-exempt.

How the IRS Implements Disaster Tax Relief Laws

After legislation like HR 5863 is enacted, the IRS issues guidance outlining:

• Who qualifies based on FEMA’s list of federally declared disasters.
• Which tax years and filing statuses are affected.
• Whether relief applies to casualty losses, retirement withdrawals, itemized deductions, or standard deductions.
• Step-by-step filing procedures (e.g., IRS Form 4684, amended return (IRS Form 1040-X), or adjustments to Schedule A).

Once a disaster tax law is enacted, the IRS issues detailed guidance so taxpayers know exactly how to claim relief. These updates ensure that new disaster tax relief provisions are applied consistently, helping victims access deductions, extensions of time to file, and other recovery benefits without delay.

Spotlight: HR 5863 – Disaster Tax Relief Act of 2023

The Disaster Relief Act of 2023 (HR 5863) provides federal tax relief for disasters that occurred in 2022 and 2023, including wildfires, hurricanes, and the East Palestine train derailment.

Key Provisions:

• Qualified disaster relief payments for lost wages, additional living expenses, and property losses are excluded from gross income.
• Deductible casualty and theft losses are expanded, even for personal use property like your home or car.
• Casualty loss deductions are generally limited to the lesser of the decrease in fair market value or adjusted basis, reduced by insurance or other reimbursement. Selling costs, such as realtor commissions, are not separately deductible as casualty losses.
• Allows taxpayers to claim disaster losses in the preceding tax year to accelerate relief.

Refer to H.R. 5863 (118th Congress) for the final enacted language.

Source: IRS Pub. 547, Figuring the Deduction

How to Verify Eligibility for Federal Disaster Tax Relief

Before claiming relief under a new disaster tax law, it’s essential to verify that your situation qualifies. Not every FEMA-declared disaster automatically triggers IRS provisions or benefits under recent disaster tax relief laws passed by Congress.

Use these steps to confirm if a disaster tax relief act applies to you:

1. Check IRS Disaster Relief Announcements: Look for updates on deadline extensions, tax exclusions, or additional deductions. → IRS Disaster Relief Center
2. Track Bills on Congress.gov: Search “disaster tax relief” or specific bill numbers like “HR 5863.” → Congress.gov
3. Speak to a Tax Professional: If unsure, consult your CPA or tax software provider to verify eligibility and avoid the double benefit rule (claiming a deduction while receiving reimbursement).

🗺️ Wondering if your area is part of a federally declared disaster? Check our Disaster Areas Resource Guide for an updated list of IRS-eligible counties and FEMA-declared zones.

Official IRS and FEMA Resources

The following resources provide official documentation and updates on new disaster tax laws and IRS procedures. Each reference helps you verify eligibility, understand current Congressional disaster relief acts, and access guidance under the Federal Disaster Relief Act:

🧾 IRS & FEMA Official Links:

• IRS Pub 547 – Casualties, Disasters, and Thefts
• IRS Disaster Relief Center
• IRS Form 4684 – Casualties and Thefts
• IRS Form 1040-X – Amended U.S. Individual Income Tax Return
• IRS Schedule A – Itemized Deductions (PDF)
• FEMA Disaster Search (Federally Declared Disaster Areas)

🏛️ Congress & Legislation Links:

• Congress.gov Main Portal

What This Means for Taxpayers

If you were affected by a federally declared disaster, recent disaster tax relief laws could directly impact your return. Here’s what that may mean for you:

• You may qualify for larger casualty loss deductions.
  Some disaster laws waive standard limitations (like the 10% AGI rule), allowing you to deduct more of your unreimbursed losses.
• You may be able to amend a prior return.
  In certain cases, you can claim disaster losses on the previous year’s tax return to receive a faster refund.
• You may exclude certain payments from income.
  Qualified disaster relief payments—such as reimbursements for living expenses or property damage—may not be taxable.
• You may have extended filing deadlines.
  The IRS often grants automatic deadline extensions for taxpayers in federally declared disaster areas.

Understanding these benefits can help you avoid leaving valuable relief on the table.

Final Thoughts: Why Disaster Tax Relief Laws Matter

When disaster strikes, IRS announcements are only part of the solution. Meaningful relief comes from Congressional disaster tax laws, which expand deductions, extend deadlines, and allow certain reimbursements to remain tax-free.

These laws ensure taxpayers in disaster zones can recover financially. Each new law brings unique provisions, so tracking both IRS guidance and Congressional updates is essential to maximize the relief available.

Bottom line: Understanding these laws can mean the difference between struggling with unexpected losses and getting timely relief that puts money back in your pocket.

Need help? Please consult with our tax experts today!