Don't Mess With Taxes

UPDATE, Thursday, Dec. 12, 2024: President Joe Biden today signed into law H.R. 5863, the Federal Disaster Tax Relief Act of 2023, which provides tax relief with respect to certain federal major disasters.

Wildfires to the west, hurricanes to the east. An array of major disasters now are covered under a tax relief bill that, after more than a year, finally will be law. (Photo by Caleb Cook on Unsplash)

A long-awaited disaster relief finally is headed to the White House, where President Joe Biden is expected to sign it into law and was signed into law by President Joe Biden on Dec. 12 (see update above).

On Dec. 4, the Senate passed by voice vote the Federal Disaster Tax Relief Act, formally known as H.R. 5863. When it officially becomes law, the measure will designate a series of presidentially-declared disasters as qualified disaster events.

The final step into the Internal Revenue Code comes more than a year after the bill was introduced by Rep. Greg Steube (R-Florida), whose state has been hard hit in recent years by major hurricanes.

It will apply retroactively to some disasters that occurred back in December 2020.

Basically, the $4.9 billion bill will provide those who sustained damages in the qualified areas an easier route to obtaining tax relief in connection with the major disaster losses.

What’s covered: Stuebe’s office noted that the new law will cover his fellow Floridians and residents of other states who were in major hurricanes’ paths. This includes hurricanes Ian, Idalia, Nicole, Fiona, Debby, Helene, and Milton.

“For too long, families have been left waiting. Passage of this bill is a good start to help so many families in Florida, Puerto Rico and across the nation,” said Stuebe.

Residents who sustained losses from certain wildfires across the country since 2014 also will get relief, as will those who suffered damages due to the Feb. 3, 2023, train derailment in East Palestine, Ohio.

The legislation also will cover any potential major disasters occurring up to 6 months after the President’s signature.

Easier tax claim process: The new law will allow those subjected to damages from federally declared disasters to claim such losses without itemizing such deductions. Instead, they will be able to add the loss deductions to the standard deduction.

In addition, such losses would not have to exceed 10 percent of a claimant’s adjusted gross income to qualify.

The bill excludes from taxpayer gross income, for income tax purposes, any amount received by an individual taxpayer as compensation for expenses or losses incurred due to a qualified wildfire disaster. This is a disaster declared after 2014 as a result of a forest or range fire.

And it also excludes relief payments for losses resulting from the East Palestine rail disaster.

“Fire survivors have been through enough in the wake of losing their homes and livelihoods to wildfires—it’s wrong to tax them on the settlement money meant to help them rebuild their lives,” said California Democratic Rep. Mike Thompson, whose constituents were among those in wildfire paths.

“Disaster settlement funds are not income, they’re compensation for what wildfire survivors have lost,” added Golden State Sen. Alex Padilla. “When a wildfire survivor is combing through the ashes of their former home, the last thing they should have to worry about is how they’re going to pay taxes on any settlement they receive.”

Long, slow road into law: Steube introduced the measure on Oct. 2, 2023. Interest in disaster relief was a no-brainer for the lawmaker, whose seen not only his congressional district but all of the Sunshine State hit hard in recent years by deadly major hurricanes.

Steube’s bill unanimously cleared the Ways and Means Committee the following month and passed the U.S. House, 382-7, this past May. But the full House victory came only after Steube took the discharge petition route.

This parliamentary procedure forces a bill to the floor for consideration regardless of leadership support, or lack of it. Steube maneuvered his bill through the process with the bipartisan support of 218 members of Congress.

The bill, however, still had to wait for Senate action, which finally came this past Wednesday, Dec. 4. That’s when the Senate passed the Federal Disaster Tax Relief Act by a voice vote.

I’ll update this post once Biden officially signs the bill into law. And when the Internal Revenue Service issues expected disaster relief guidance under the new law, I’ll post about that, too.

Until then, you might find these natural disaster items of interest:

• Beware of disaster-related charity scams
• After 3 hurricanes, IRS grants tax relief, and May 1, 2025 deadline, to all Florida taxpayers
• Illinois, Washington, and Arizona state disaster-area taxpayers now have Feb. 3, 2025, deadline

Advertisements

🌟 Search Amazon Business and Money Books 🌟
The text link above is an affiliate ad. If you click through and then buy a product, I receive a commission.