New Tax Act Temporarily Improves Casualty Loss Deductions and Provides a Wildfire Relief Exclusion

On Sept. 11, 2026, the Doug LaMalfa Federal Disaster Tax Relief Certainty Act was signed into law, temporarily changing the rules for personal casualty loss deductions for federally declared natural disasters and excluding qualified relief payments to wildfire victims from gross income.  

For casualty losses from natural disasters occurring after Dec. 28, 2019, and before Jan. 1, 2027, taxpayers can deduct the loss without itemizing and without meeting the 10% of AGI threshold. The new law also increases the casualty floor from $100 to $500. For example, if a person suffers a personal casualty loss in a presidentially declared disaster, the taxpayer deducts the fair market value after the casualty from the fair market value before (limited to the taxpayer’s basis) and reduces this economic loss by any insurance benefits received, just as before the new law. The law also changes the deduction rules by increasing the per-casualty reduction from $100 to $500 and allows taxpayers to claim the resulting deduction without itemizing. 

The Act provides exclusion from income relief payments for wildfire victims received after taxable years after 2025 for qualifying wildfires between Dec. 31, 2014, and Jan. 1, 2027. If a relief agency provides money for expenses like temporary housing, lost wages, personal injury, death and emotional distress that aren’t insurance-reimbursed, that payment is excluded from the taxpayer’s income. Taxpayers cannot claim deductions or credits for expenses covered by excluded payments and the Act bars payments from increasing property basis.  

The Act is named for Congressman LaMalfa, who died in January 2026, and who was a strong advocate for disaster relief, particularly for wildfire victims in California.