The American Property Casualty Insurance Association (APCIA) has parised the US House of Representatives for passing H.R. 5366, the Dough LaMalfa Federal Disaster Tax Relief Certainty Act, a bipartisan bill aimed at providing tax certainty and relief to households and businesses recovering from natural disasters.
"H.R. 5366 recognizes the simple but critical reality: disaster survivors should not face unexpected tax burdens while trying to rebuild their lives and communities," said Sam Whitfield, APCIA's senior vice president of federal government relations and political engagement. “By extending and codifying disaster-related tax relief, the House has taken an important step to help families recover more quickly, reduce financial strain, and support resilient rebuilding after catastrophic events.”
The legislation is intended to deliver more predictable and accessible tax relief for disaster survivors by extending and refining rules that have previously been enacted on a temporary, event-by-event basis.
It makes it easier for individuals to deduct personal casualty losses arising from federally declared disasters through 2026, including for taxpayers who take the standard deduction rather than itemizing. The aim is to ensure that more households with uninsured or underinsured losses can benefit, not just those with itemized deductions.
H.R. 5366 also exempts qualifying wildfire compensation – such as payments for property loss, additional living expenses, or emotional distress – from federal income tax through 2030, while including safeguards to prevent duplicate tax benefits. This is particularly relevant in western states where litigation and settlement processes mean that wildfire‑related payouts can arrive several years after an event. Without clear rules, survivors can face unexpected tax liabilities on compensation they assumed would be tax‑free.
The bill comes against a backdrop of rising catastrophe losses and greater reliance on both public and private support after major events.
Recent years have seen a record number of billion‑dollar weather and climate disasters in the US, with severe convective storms, hurricanes, wildfires, and floods all contributing to elevated loss totals. At the same time, inflation in construction costs and tighter reinsurance terms have put additional pressure on property insurance affordability and availability in high‑risk regions.
This environment has underscored the importance of mechanisms that support faster, more predictable recovery for policyholders and communities. While H.R. 5366 does not change insurance contracts or claims obligations, it reduces the risk that survivors see part of their recovery eroded by federal tax bills they did not anticipate, which can complicate settlement discussions and delay rebuilding.
By expanding access to disaster‑related loss deductions, the bill can help households and small businesses close part of the gap between insured and total economic losses, supporting broader economic recovery in affected areas. Healthier local economies generally make it easier for insurers to maintain books of business and for agents to place coverage, particularly for small commercial and personal lines accounts.
The bill may also influence how some policyholders and their advisers think about coverage gaps and deductibles. If uninsured losses can be offset, in part, through tax deductions in a declared disaster, that may affect how certain buyers view the trade‑off between higher deductibles and premium savings. For most insureds, however, the deduction will only cover a portion of the gap, keeping traditional and parametric insurance central to their resilience strategies.
“Disaster recovery policies work best when they are paired with forward-looking measures that promote resilience and risk reduction before the next catastrophe strikes,” Whitfield added. “APCIA encourages Congress to continue pairing recovery-focused tax relief with policies that support mitigation, smarter land-use decisions, stronger building codes, and investments that reduce losses and protect taxpayers over the long term.”
