Protect Innocent Victims of Taxation After Fire Extension Act

Key Points

• This bill would stop the federal government from taxing money that wildfire victims receive to help them recover. Relief payments for things like home repairs, temporary housing, lost wages, personal injuries, and emotional distress would all be excluded from taxable income.
• To qualify for the tax break, the wildfire must have been officially declared a federal disaster after December 31, 2014. This means victims of major wildfires over the past decade, including the devastating 2025 Los Angeles fires, could benefit.
• The tax exclusion only applies to losses not already covered by insurance. Victims also cannot claim a tax deduction or credit for the same expenses that were paid for with tax-free relief money, preventing a double benefit.
• If passed, the new tax rules would apply to payments received after December 31, 2025, and would expire at the end of 2032, giving wildfire victims a seven-year window of tax relief.
• The bill has bipartisan support, introduced by Republican Rep. LaMalfa along with both Republican and Democratic cosponsors from California, Oregon, and Utah, all states with significant wildfire risk.