Senate Passes the Federal Disaster Tax Relief Act of 2023; Bill Goes to President Biden for Signature

H.R. 5863, the Federal Disaster Tax Relief Act of 2023, contains three disaster-related tax provisions that provide financial relief to those impacted by federally declared disasters.

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Were you impacted by a federally declared disaster such as a wildfire or a train derailment? Call Frost Law today at (410) 497-5947 to understand your tax relief options.

Casualty Loss Relief

The provision extends favorable casualty loss rules to major disasters declared by the President starting on February 26, 2021, and ending 60 days after the enactment date of this law. Each personal casualty loss is reduced by $500 (and not by $100 plus 10% of adjusted gross income), and the loss amount increases the taxpayer’s standard deduction.

Qualified Wildfire Relief Payment Relief 

Qualified wildfire relief payments received starting on January 1, 2020, and ending on December 31, 2025, are excluded from an individual taxpayer’s income.

Qualified wildfire relief payments are defined as 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 the losses, expenses, or damages are not compensated for by insurance or otherwise. A qualified wildfire disaster is any federally declared disaster declared after December 31, 2014, due to any forest or range fire.

If an individual has a claim for a refund due to this provision, the refund statute of limitations end date with respect to the claim will not expire any earlier than one year after the enactment date of this law. In addition, the refund amount is not limited to the amounts paid in the preceding two- or three-year period (whichever is normally applicable).

East Palestine Train Derailment Payment Relief 

On February 3, 2023, there was a train derailment in East Palestine, Ohio. East Palestine train derailment payments are excluded from an individual taxpayer’s income.

East Palestine train derailment payments are defined as any amount received by or on behalf of an individual as compensation for loss, damages, expenses, loss in real property value, closing costs with respect to real property (including realtor commissions), or inconvenience (including access to real property) resulting from the East Palestine train derailment if such amount was provided by a Federal, State, or local government agency, Norfolk Southern Railway, or any subsidiary, insurer, or agent of Norfolk Southern Railway or any related person.

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This provision applies to amounts received on or after February 3, 2023.

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Don't miss out on potential tax relief from wildfires or train derailments. Contact Frost Law at (410) 497-5947 or fill out our contact form to see how our attorneys can help.

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