Recognizing the ongoing challenges posed by natural disasters, the bill includes provisions for disaster-related tax relief. This aims to provide financial support to individuals and businesses affected by disasters, offering a measure of relief during challenging times.
In a move aimed at providing continued support to individuals affected by disasters, an extension of the rules for the treatment of certain disaster-related personal casualty losses has been implemented. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 initially granted tax relief to those in qualified disaster areas, offering special rules for personal casualty losses.
Notable changes included eliminating the requirement for losses to exceed 10 percent of adjusted gross income (AGI) and allowing deductions without itemizing. The extension encompasses areas where a major disaster was declared by the President between January 1, 2020, and 60 days after the date of enactment of the proposal, covering incidents from December 28, 2019, to the proposal's enactment date.
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Exclusion From Gross Income for Compensation for Losses or Damages Resulting From Certain Wildfires
A significant amendment in the definition of gross income has been introduced, excluding from taxation any amount received as a qualified wildfire relief payment. This provision applies to compensation for expenses, damages, or losses resulting from a qualified wildfire disaster, ensuring relief for individuals.
The exclusion is applicable to qualified wildfire relief payments received during taxable years from January 1, 2020, to January 1, 2026, provided the expenses, damages, or losses are not compensated by insurance or other means. The legislation also includes safeguards to prevent double benefits.
East Palestine Disaster Relief Payments
Specific relief measures have been enacted for individuals affected by the East Palestine train derailment on February 3, 2023. Designated as qualified disaster relief payments under IRC section 139(b), East Palestine train derailment payments are excluded from gross income.
This includes compensation for losses, damages, expenses, loss in real property value, closing costs, and inconveniences resulting from the incident. The relief applies to amounts received on or after February 3, 2023, and covers payments from Federal, State, or local government agencies, Norfolk Southern Railway, or any subsidiary, insurer, or agent associated with Norfolk Southern Railway.
