Disaster Survivors Tax Relief and Recovery Act

Key Points

• This bill, introduced by Ms. Chu, helps people living in areas hit by major disasters in 2025. It allows survivors who lost work to use their 2024 income levels to qualify for the Child Tax Credit and Earned Income Tax Credit, ensuring they don't lose these benefits because of a temporary drop in pay.
• Survivors can withdraw up to $100,000 from their retirement accounts, like a 401(k) or IRA, without paying the usual 10% early withdrawal penalty. They are also given three years to pay the income taxes on that money or put the money back into their retirement fund to avoid taxes entirely.
• The policy makes it easier to deduct property damage from taxes. It allows people to claim disaster-related losses as part of their standard deduction, meaning they can get a tax break for repairs and lost belongings even if they do not normally list every individual deduction on their tax forms.
• To help rebuild communities, the bill increases the amount of tax credits available for building low-income housing in disaster zones during 2026 and 2027. It also encourages more help by removing the normal limits on how much cash people and businesses can donate to disaster relief charities.
• The bill extends a special rule for wildfire victims, ensuring that any money they receive as compensation for losses or damages from certain wildfires remains tax-free through the year 2036.