In December 2024, President Biden signed the Federal Disaster Tax Relief Act (the Act) into law, providing favorable tax provisions for victims of disasters occurring after December 2020, (e.g. Texas Severe Winter Storm Disaster, Hurricane Ida, etc.) The Act allows a higher disaster deduction then what was originally allowed. The Act eliminates the requirement that casualty losses are only allowed to the extent that the loss exceeds 10% of an individual’s adjusted gross income. In lieu of the 10% of AGI threshold, the Act allows a deduction for losses that exceed $500. Additionally, taxpayers are not required to itemize their deductions to claim a casualty loss. This applies to any presidentially declared disaster from December 2020 to January 11, 2025. For example, if you had a disaster loss of $10,000 and a salary that resulted in an AGI of $100,000, previously you were not able to use the loss on your return. Under this Act, the loss would reduce your taxable income by $9,500 for generally a federal tax savings of about $1,900. You would owe state taxes of about $40-$500. This is a net of about $9,000. The period to file an amended return to get a refund for these disasters has been extended for a year, meaning, there is still time to file for such a refund.
President Biden Signs Federal Disaster Tax Relief Act
