As California burns, Congress is planning to limit taxpayers’ ability to write off losses from future wildfires and other disasters.
The disaster write-off is one of the many little-known deductions set to be mostly wiped out in the GOP tax plan, but it’s getting fresh attention because of the fires that have devastated parts of Southern California over the last week.
The House tax bill entirely eliminates the deduction that allows people to claim uninsured losses after all types of disasters; the Senate version allows people to take the deduction only if the president declares a federal disaster.
So far this year, nearly 58,000 wildfires have burned more than 9 million acres in the U.S., according to the National Interagency Fire Center. Only a small number would qualify taxpayers for relief under the Senate bill.
House Majority Leader Kevin McCarthy’s (R-Bakersfield) staff said the federal disaster version of the deduction is likely to be included in the final tax legislation as the House and Senate work to reconcile their bills over the next few weeks, but acknowledged there isn’t a long-term plan to allow people to deduct the uninsured costs of rebuilding from smaller disasters.
That means unless Congress decides to pass a tax exemption for each disaster, future victims will have to pay taxes on the personal costs of rebuilding or hope the incident is big enough to be declared a federal disaster. Americans deducted $1.6 billion in 2015 for uninsured losses in natural disasters that were not declared federal disasters, according to the Internal Revenue Service. (California figures were not available.)
The House tax bill does include a limited deduction for the victims of this year’s hurricanes in Texas and Florida, and even 2012’s Superstorm Sandy. But it leaves out relief for the victims of recent big fires, which Democrats have used to criticize their California colleagues.
“It’s appalling Republicans are taking money from any wildfire victims to pay for tax cuts for the rich,” Sen. Dianne Feinstein (D-Calif.) said in a statement. “A family who loses everything in a wildfire shouldn’t have to pray for a federal declaration so they can recover. Tax relief should be available to help all victims regardless of the type of natural disaster.”
House Minority Leader Nancy Pelosi (D-San Francisco) also took California Republicans to task Thursday for supporting the House GOP tax bill, saying they “voted to discriminate against victims of fire. We certainly want to have the deduction for victims of hurricanes and the rest, but why are they doing this to our state?”
Some Republicans have said they want fire victims to get the same benefits as hurricane victims, but they aren’t clamoring for the broader deduction to be preserved.
For this year’s California fires, Republican leaders have tacitly committed to including tax relief for victims in a separate spending bill this year, along with millions in disaster relief for the October fires that was requested by the entire California delegation.
“We’ve got to provide relief for people that lost property in the wildfires,” said Rep. Mimi Walters (R-Irvine), who wrote the tax language expected to be added to the spending bill. “What we are doing for the hurricane victims, we are doing for the fire victims … to make sure that we were on parity with them, that everybody got treated the same.”