Signed into law in December 2024, the Federal Disaster Tax Relief of 2023 (H.R. 5863) brings much-needed relief to taxpayers affected by federally declared disasters.

The legislation eliminates the requirement that casualty losses must exceed 10% of an individual's Adjusted Gross Income (AGI) before becoming deductible. Previously, only the portion of casualty losses exceeding 10% of AGI could qualify for deduction. With the new legislation, the AGI threshold is removed, allowing each qualified disaster loss to be deductible once it surpasses a $500 minimum. Individual taxpayers can now claim qualified disaster losses even if they did not itemize their deductions, and this benefit is available in addition to the standard deduction.

Eligibility Period:

• Disaster Declaration: The favorable tax treatment applies to major disasters declared by the President between January 1, 2020, and February 10, 2025.
• Incident Period: The disaster must have an incident period starting on or after December 28, 2019, and ending no later than January 11, 2025.

Notable Disasters Covered:

• Hurricanes: Helene, Milton, Ian
• Wildfires: Hawaii, California

For a comprehensive list of qualifying disasters, visit the FEMA website.

Next Steps:
If you have incurred qualified disaster losses not covered by insurance, reach out to your KL advisor to determine how this legislation can benefit you.