On Dec. 12, 2024, President Biden signed the Federal Disaster Tax Relief Act of 2023 (H.R. 5863) into law designating a series of presidentially-declared disasters as qualified disaster events. This legislation provides for the elimination of the requirement that personal casualty losses must exceed 10% of adjusted gross income (“AGI”).

With the new legislation, the AGI threshold is eliminated, and each separate casualty is deductible once it exceeds a $500 floor. Individual taxpayers will be allowed to claim this type of casualty loss “above the line”, meaning even if they don’t itemize deductions, they can still take the casualty loss in addition to the standard deduction.

The legislation is available for all presidentially declared disasters occurring between Jan. 1, 2020, and Jan. 11, 2025 (if declared by Feb. 9, 2025) and includes hurricanes Ian, Idalia, Nicole, Fiona, Debby, Helene and Milton and the wildfires in Hawaii and California, among many other disasters that occurred over the last four years. See FEMA website to search for specific disasters that fall within this qualified period.

Taxpayers can now finally file amended returns to obtain refunds for previously non-deductible casualty losses.  Individual taxpayers should consult their tax advisors if they experienced losses from federally declared disasters between 2021 and 2023 or received relief payments from wildfires or the East Palestine Train Derailment.