Washington, D.C.—Today, President Biden signed H.R. 5863, the Federal Disaster Tax Relief Act, into law. This legislation included Congressman Doug LaMalfa’s (R-Richvale) bill, H.R. 4970, Protect Innocent Victims of Taxation After Fire Act, which exempts wildfire relief payments from federal income taxes. The legislation also streamlines the process for deducting losses from various natural disasters and includes provisions to exempt taxation on legal fees, emotional distress, lost wages, and other expenses linked to wildfire losses. Taxpayers will now be able to claim refunds for any taxes paid on wildfire settlement funds since 2020 by filing an amended return or claiming the change in the next tax year
What This Means for Wildfire Survivors:
You will amend your 2022 tax returns to remove those payments. Once you remove it from the federal, it will flow into the CA. The federal and states have been updating their software.
See How do I amend my federal tax return for a prior year? and I need to amend my state return.
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