New construction on Lake Ave. in Altadena (Photo – W.K.)
A bipartisan federal law signed Friday, Sept. 11, will allow qualifying wildfire relief payments, including settlements received by Eaton Fire survivors, to be excluded from federal taxable income regardless of when the payments are received.
By News Desk
The Doug LaMalfa Federal Disaster Tax Relief Certainty Act provides long-awaited relief for survivors of the January 2025 Los Angeles County fires. The law prevents survivors from facing federal taxes on eligible compensation they need to rebuild their homes and lives.
Rep. Judy Chu, D-Calif., whose 28th Congressional District includes communities affected by the Eaton Fire, has pushed for tax relief since the aftermath of the disaster. Earlier this year, she introduced the Disaster Survivors Tax Relief and Recovery Act, a broader proposal addressing additional financial challenges facing families rebuilding after major disasters.
“This marks a major victory for Eaton Fire survivors and a testament to what Congress can accomplish when Democrats and Republicans come together to put disaster survivors first,” Chu said.
Chu said the new law will ensure survivors do not lose part of their recovery payments to federal taxes simply because their settlements arrive after an arbitrary deadline.
“Survivors have already lost far too much,” she said. “They deserve to keep the full value of the compensation they receive to rebuild their homes and their lives.”
Chu’s broader legislation would allow disaster survivors to withdraw up to $100,000 from retirement accounts without the usual early-withdrawal penalty. It would also protect access to the Earned Income Tax Credit and refundable Child Tax Credit for eligible families whose incomes declined after a disaster, expand incentives for charitable disaster relief, provide additional Low-Income Housing Tax Credits for disaster-affected communities and offer further tax relief for disaster losses.
According to figures cited by Chu, two out of three Eaton Fire survivors have not yet returned home. Nearly half have exhausted their savings or taken on debt, while the typical homeowner faces an estimated $500,000 rebuilding gap.
Chu said the next priority should be fully funding Gov. Gavin Newsom’s disaster supplemental request without conditions.
“Without that investment, recovery efforts will stall, costs will continue to grow, and families will remain unable to come home,” she said.
Chu added that she will continue working to pass the remaining provisions of her disaster tax relief legislation and secure federal disaster funding for affected communities.
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