HR6842-119

What This Bill Does

The Disaster Survivors Tax Relief and Recovery Act is a tax-relief package for federally declared disasters beginning on or after December 28, 2024 and declared from January 1, 2025 through 60 days after enactment. It lets qualified disaster-displaced individuals elect to use prior-year earned income when calculating the refundable child tax credit and earned income tax credit for the first taxable year beginning in 2025. It temporarily disregards qualified disaster relief contributions when applying normal individual and corporate charitable contribution percentage limits, while requiring cash gifts to eligible charities, contemporaneous written acknowledgment, and disaster-relief purpose documentation. It waives the section 72(t) early-distribution tax for qualified disaster retirement distributions up to $100,000 per disaster, allows three-year recontribution, and relaxes plan rules for treating distributions as qualified. It modifies personal casualty-loss rules by increasing the standard deduction by net disaster losses and adjusting thresholds. It extends the Federal Disaster Tax Relief Act wildfire compensation gross-income exclusion from 2026 to 2036. It also increases State low-income housing credit ceilings for 2026 and 2027 for qualified disaster zone buildings, capped at $8.25 times State population, with extended placed-in-service timing for designated disaster-zone credits.

Who Benefits and How

Disaster-displaced families benefit from the prior-year earned-income lookback for refundable child and earned income credits. Disaster relief charities benefit because donors receive more generous deduction treatment for qualified cash contributions. Disaster survivors with retirement accounts benefit from penalty-free access to up to $100,000 per disaster and three-year repayment. Households with casualty losses benefit from easier disaster-loss deduction treatment. Wildfire victims benefit from a longer income exclusion for qualifying compensation. Low-income housing developers and disaster-zone renters benefit from added housing credit allocations for recovery housing.

Who Bears the Burden and How

IRS tax administrators must implement multiple temporary rules, verify disaster-zone eligibility, process elections and mathematical-error corrections, monitor charitable substantiation, administer retirement-distribution treatment, and manage housing-credit guidance. Retirement plan administrators must identify and report qualified disaster distributions and repayment treatment. State housing credit agencies must allocate and designate additional credits for disaster-zone buildings. Federal taxpayers bear the revenue loss from credits, deductions, exclusions, and housing tax credits.

Key Provisions

• Allows qualified disaster-displaced taxpayers to use prior-year earned income for refundable child tax credit and earned income tax credit calculations.
• Expands charitable deduction treatment for qualified disaster relief cash contributions made in 2025 after the covered disasters.
• Waives the 10 percent early retirement distribution tax for up to $100,000 of qualified disaster distributions with three-year repayment.
• Expands personal casualty-loss relief by increasing the standard deduction for net disaster losses.
• Extends wildfire compensation gross-income exclusion through 2036.
• Increases 2026 and 2027 low-income housing tax credit ceilings for qualified disaster-zone buildings.