On Dec 12, 2024 the President signed into law H.R. 5863 The Federal Disaster Tax Relief Act. The act has three provisions that will affect taxpayers who have losses due to wildfires, hurricanes, and other federally declared disasters.
1. Qualified wildfire relief payments received between 1/1/20 and 12/31/26 are excluded from taxable income. If the taxpayer paid tax on this type of payment in a previous year, they can amend that tax return to remove the income and get a refund. The deadline to amend a 2020 or 2021 return for this issue has been extended to 12/12/2025. (2022 and 2023 amended returns are still within their normal deadlines.)
2. Relief payments due to the East Palestine train derailment are non-taxable.
3. The rules for deducting a casualty loss occurring after 1/1/2020 have changed. The 10% of AGI deductible has been suspended, and the loss deduction can be claimed even if you don't itemize your other deductions on schedule A. This means that if you had a casualty loss due to a federally declared disaster, you can amend your tax return for the year the loss occurred, and may qualify for a larger deduction and additional refund of tax. A list of qualifying disasters is here.
https://www.irs.gov/newsroom/tax-relief-in-disaster-situations
However, the Act does not extend the amending deadline for this issue. Under current rules, taxpayers could amend to claim losses using the new rules for 2021, 2022 and 2023, but it is too late to amend for 2020 losses. This could change under IRS guidance, we will have to wait and see.
End of FAQ
Begin speculation
We don't know at this time if the IRS will delay 2024 tax returns to include the changed rules on casualty losses, but probably there will be a delay. We also don't know when Turbotax will be programmed to follow the new rules. And lastly, we don't know when the IRS will be ready to accept amended returns for older losses (2021, 2022 and 2023). Check with the IRS or check back here for updates.
