Protect Innocent Victims of Taxation After Fire Extension Act

Key Points

• This bill would make wildfire relief payments tax-free at the federal level. Any money people receive to cover losses, expenses, or damages from a federally declared wildfire disaster would not count as taxable income.
• The tax exclusion covers a wide range of payments, including money for additional living expenses, lost wages (not from your regular employer), personal injury, death, and emotional distress caused by a wildfire.
• The bill applies to wildfires declared as federal disasters after December 31, 2014, but the actual tax break only kicks in for payments received after December 31, 2025. This means it could help people still receiving settlements or relief for fires going back over a decade.
• The tax break does not apply to insurance payouts or other payments that already covered the same losses. It also prevents a double benefit, so you cannot claim a tax deduction or credit for expenses already covered by these tax-free relief payments.
• The bill has bipartisan support, introduced by Senators Padilla, Lummis, Wyden, and Sheehy, and has been referred to the Senate Finance Committee.