Wildfire survivors in the West will no longer have to pay federal income taxes on their recovery settlements and legal bills after in some cases waiting more than five years.
Approximately six months after the U.S. House of Representatives virtually unanimously approved the Federal Disaster Tax Relief Act of 2023, the Senate enacted it on Wednesday night. Tucked behind among opposing tax measures from Senate Democrats and Republicans, it has been stuck for months.
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President Joe Biden is expected to sign the bill, which would exempt survivors of wildfires between 2016 and 2026 from paying federal income taxes on settlements for disaster recovery and legal expenses received or paid between 2020 and 2026.
It’s probable that victims abroad will gain as well. Although the Internal Revenue Service’s involvement has mainly protected the survivors of the East Palestine train derailment in Ohio in 2023 from federal income tax on payouts from Norfolk Southern, the bill still applies to them.
Through a casualty loss deduction, the catastrophe legislation would also offer assistance to those who have survived natural disasters after 2020. Those who only got partial insurance payments for home damage and other residential property damage might then claim those undiscovered losses as a non-itemized deduction on their federal income taxes.
Survivors of disasters advocate for aid in public
The law, which was filed by Republican Representative W. Gregory Steube of Florida last year, was passed after a political action group made a public appeal last month. throughout order to attract the attention of the two heads of the U.S. Senate Finance Committee, where the bill was seated, American Disaster Survivors funded billboards throughout Idaho and Oregon requesting assistance. The committee is chaired by Democrat Ron Wyden, the senior U.S. senator from Oregon, and its ranking Republican member is U.S. Senator Mike Crapo of Idaho. Survivors of fires that destroyed towns in California in 2017 and 2018 and are yet just partially rebuilt created the catastrophe PAC.
Because federal tax codes are up for negotiation in 2025 and there isn’t much political will to work on long-term tax policy during the lame duck session before a new Congress and administration take office in January, Wyden spokesperson Hank Stern stated that the law would expire in 2026. In a speech after the measure was passed, Wyden stated that it was long overdue and essential.
He claimed that after their companies and residences were destroyed by fire, their belongings and means of subsistence were lost, and that at last the federal government was exercising common sense.
He and other Democrats and Republicans who supported the bill in the California House and Senate claimed that Senate Republicans obstructed progress even though they worked across party lines to approve the law in the Republican-controlled House.
In his speech, Wyden stated, “We will be able to tell Westerners who have been affected by these large fires that they will be able to sleep tonight in the Western United States with a little relief that the federal government has finally come to its senses and made sure that they are not going to have this additional tax burden.”
According to American Disaster Relief PAC spokespeople, it will affect wildfire survivors in numerous states.
For millions of Americans who have been affected by tragedy in California, Oregon, Hawaii, Washington, and Idaho, this has provided a much-needed ray of hope.
The federal bill is comparable to a state bill that removed state income taxation on settlements and legal fees for victims of wildfires and was unanimously approved by the Oregon Legislature in the spring of 2024. Survivors of the 2020 Labor Day Fires, such as Sam Drevo, who survived the Santiam Canyon fire that destroyed a large portion of the city of Gates in the center of the Santiam State Forest, supported that bill, Senate Bill 1520.
I express my sincere gratitude that this passed on behalf of all fire survivors worldwide. Drevo stated, “I’m not very excited about the sunset, but it’s a huge step forward for fire survivors.”
He and his mother are still figuring out how much tax she was required to pay on the compensation she got to replace her Gates home, which was totally destroyed by the flames.
I am confident that it will be beneficial, as well as beneficial to others. “Having this kind of tax relief is a huge thing in general, especially when you lose everything,” he remarked.
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