Key insights
- Federal disaster tax relief provisions — including casualty loss deductions, extended filing deadlines, and other benefits — remain available when a federally declared disaster occurs.
- The federal income tax exclusion for qualified wildfire relief payments has ended, meaning payments received in 2026 and later are taxable.
- The exclusion covered a broad set of wildfire‑related expenses for payments received from 2019 – 2025, which may still matter when reviewing prior‑year filings.
- The deadline to amend past returns under the special extension has passed, but tax professionals may still need to verify prior-year treatment or address IRS questions.
Get help understanding your current tax relief options.
When a federally declared disaster strikes, the IRS may offer tax relief to help individuals and businesses recover — including extended filing deadlines, casualty loss deductions, and other provisions that can ease the financial burden. These relief measures continue to be available today and evolve as new disasters occur.
However, one key provision — the federal income tax exclusion for qualified wildfire relief payments — has now expired.
Many remember receiving those payments without tax consequences and are now surprised to see different treatment in 2026. But the relief was temporary, and unless Congress takes new action, the exclusion is now part of a closed chapter.
A look back at the wildfire relief exclusion
The Federal Disaster Tax Relief Act of 2023 created a short‑term rule allowing individuals to exclude certain wildfire‑related payments from income. This relief applied only to payments received in tax years beginning after December 31, 2019, and before January 1, 2026.
Any disaster relief payment received in 2026 or later no longer falls under the income tax exclusion, even if the underlying wildfire occurred during an eligible year.
What qualified
When it was in effect, the law allowed an exclusion for qualified wildfire relief payments tied to a federally declared wildfire. Covered items included additional living expenses, certain lost wages, personal injury, emotional distress, and death benefits.
The law applied only to expenses not covered by insurance. Taxpayers couldn’t claim deductions, credits, or basis increases tied to any expense paid with excluded funds.
Who was eligible
Relief had to stem from a wildfire that was part of a federally declared disaster as defined in IRC §165(i)(5)(A). Anyone living in or holding property in such an area could receive qualifying payments.
Timing was the deciding factor
The most important boundary was the year the payment was received.
Any payment received in 2026 or later no longer falls under the exclusion, even if the underlying wildfire occurred during an eligible year.
The amendment window has closed
The Act included a special extension of the refund statute of limitations, permitting taxpayers to amend returns to claim the exclusion. That extension expired December 12, 2025.
Even though taxpayers can no longer amend solely to take advantage of the exclusion, advisors may still need to evaluate earlier filings or address IRS correspondence about past wildfire‑related payments.
Current federal disaster tax relief still available
Although the wildfire income exclusion has ended, other disaster‑related provisions continue to apply when the IRS issues a federal disaster declaration.
Casualty loss deductions
Individuals and businesses may be able to deduct certain losses tied to damage or destruction of property in a federal disaster area, subject to IRS rules.
Postponed filing and payment deadlines
When the IRS grants disaster relief, affected taxpayers may receive adjusted deadlines for filing returns, making payments, or completing time‑sensitive tasks. These adjustments vary by disaster and IRS announcement.
Retirement plan hardship withdrawals
Disaster‑related access to retirement funds may be available when authorized by Congress or the IRS for specific events.
Because active relief options change throughout the year, taxpayers benefit from working with professionals who monitor new declarations and understand how each one applies.
Frequently asked questions about IRS disaster relief
Are wildfire relief payments still tax‑free in 2026?
No. Payments received in 2026 or later are taxable under current law. The exclusion covered payments received between 2020 – 2025 only.
What counted as a qualified wildfire relief payment (during the eligible years)?
Amounts paid to cover unreimbursed losses or expenses from a federally declared wildfire, including additional living expenses, certain lost wages, injury, emotional distress, and death benefits.
Why did my 2026 payment get taxed?
Because the time period ended. The exclusion applied only to payments received in tax years beginning after 12/31/2019 and before 1/1/2026. However, relief may be available under other tax rules depending on the source of the payment. A discussion with your tax advisor is key to evaluating alternatives.
What if I had a disaster loss — can I take a casualty loss deduction?
Maybe. Personal losses must be tied to a federal disaster area to be deductible, and the calculation follows IRS rules on casualty losses deduction (Form 4684). Some years have special treatment; we can walk you through what applies to your event and year.
Where do I find active IRS disaster relief by location?
The IRS posts each new announcement. For example, its Washington notice extended deadlines to May 1, 2026 for listed counties.
How CLA can help with federal disaster tax relief
If you were impacted by a disaster — wildfire or otherwise — and need help with IRS disaster relief, the casualty loss deduction, or confirming whether you’re in a federal disaster area, CLA’s tax team can help determine if you qualify and help you file your return correctly.