Exclusion of Income from Wildfires

Congress passed the Federal Disaster Tax Relief Act of 2023, which made qualified wildfire relief payments not taxable to the extent your losses, expenses, or damages compensated by these payments were not otherwise compensated for by insurance or other reimbursement.

You can exclude qualified wildfire relief payments you received between January 1, 2020, and December 31, 2025, for any forest or range fire declared a federal disaster in 2015 or a later year. Qualified wildfire relief payments include any amount you receive for losses, expenses, or damages, including compensation for:

• Additional living expenses
• Lost wages (other than compensation paid by an employer who would have otherwise paid your wages)
• Personal injury or death, or
• Emotional distress

You cannot take a credit or deduction, or increase the basis in your property, related to any expense for which you were compensated by a qualified wildfire relief payment.

See IRS.gov  for more information.