Disaster Relief
OBBBA expands disaster loss relief so taxpayers can deduct more losses from federally declared disasters between 2020–2025 without the 10% AGI floor, even if using the standard deduction. Starting in 2026, similar relief applies to certain state-declared disasters with governor and Treasury approval.
Disaster Relief
The additional disaster relief rules for qualified disaster losses, first enacted in the 2020 Taxpayer Certainty and Disaster Tax Relief Act and later extended under the 2023 Federal Disaster Tax Relief Act, are further expanded under OBBBA to cover:
Disasters declared between January 1, 2020, and September 2, 2025 (60 days after OBBBA’s enactment); and
Disasters that began after December 27, 2019, and on or before July 4, 2025, and ended on or before August 3, 2025 (30 days after enactment).
For disasters within this extended period, the following apply:
The 10% of AGI floor for net disaster losses does not apply.
The per-casualty reduction increases from $100 to $500.
Taxpayers may claim personal casualty loss deductions even if they take the standard deduction.
Example – Qualified Disaster Loss:
Casualty loss = $50,000; insurance reimbursement = $10,000; net loss = $40,000; AGI = $200,000.
General Rule (non-qualified): $100 reduction per event → $39,900; then reduce by 10% of AGI ($20,000) → deductible loss = $19,900.
Qualified Disaster Loss: $500 reduction → $39,500; 10% AGI floor waived → full $39,500 deductible. Plus, taxpayer may claim standard deduction + $39,500 even without itemizing.
State-Declared Disasters (beginning 2026)
Starting in the 2026 tax year, taxpayers may also claim casualty losses from state-declared disasters in addition to federally declared ones.
A state-declared disaster includes natural disasters (hurricanes, tornadoes, storms, floods, tidal waves, tsunamis, earthquakes, volcanic eruptions, landslides, avalanches, snowstorms, droughts, etc.) or fires, floods, and explosions regardless of cause.
To qualify, both the state’s governor (or D.C. mayor) and the U.S. Treasury Secretary must agree the disaster is sufficiently severe to warrant relief.
For this rule, “state” also includes the District of Columbia, Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.