Disaster Survivors Tax Relief and Recovery Act

Bill Number

H.R. 6842

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-12-18: Referred to the House Committee on Ways and Means.

Last Updated

2026-01-20T15:41:41Z

AI-Generated Summary

Purpose of the Legislation

The Disaster Survivors Tax Relief and Recovery Act (H.R. 6842) aims to offer temporary tax relief to individuals and businesses impacted by major federal disasters declared between January 1, 2025, and 60 days after enactment. It focuses on easing financial burdens from lost income, property damage, and recovery costs through adjustments to tax credits, deductions, retirement rules, and housing incentives, primarily for disasters starting from December 28, 2024.

Key Provisions

• Earned Income Adjustments (Section 2): Allows "qualified individuals" (those living in or displaced from disaster areas) to use their prior year's earned income (instead of 2025's) when calculating the Child Tax Credit and Earned Income Tax Credit if 2025 income drops due to the disaster. Applies to joint filers if one spouse qualifies; errors in this substitution are treated as simple math mistakes.

• Charitable Contribution Modifications (Section 3):
• Temporarily suspends limits on cash donations for disaster relief made between January 1, 2025, and 60 days after enactment, allowing full deductions up to income limits (with carryover for excess). Requires written acknowledgment from the recipient charity.
• Excludes certain donations (e.g., to donor-advised funds or specific nonprofit types).
• Increases the deduction limit for food inventory donations to 25% of fair market value (from 15%) for 2025 contributions.

• Retirement Fund Rules (Section 4):
• Permits penalty-free withdrawals up to $100,000 from retirement plans (e.g., 401(k)s, IRAs) for those in disaster areas who suffered economic losses, from the disaster's start through 180 days after enactment. Withdrawals can be spread over 3 years for tax purposes and repaid within 3 years without taxes.
• Allows re-contribution of prior withdrawals intended for home purchases in disaster areas that couldn't proceed due to the event.
• Raises loan limits from qualified employer plans to $100,000 (from $50,000) and full account value (instead of half), with repayment delays up to 1 year for outstanding loans during the disaster period.
• Plans have until 2027 (or later for government plans) to amend rules retroactively.

• Personal Casualty Losses (Section 5): Treats disaster-related property losses (e.g., from fire or flood) more favorably by waiving the 10% adjusted gross income threshold for deductions, lowering the per-loss floor to $500, and adding net losses to the standard deduction (without affecting alternative minimum tax).

• Wildfire Compensation Extension (Section 6): Extends the tax-free exclusion for compensation received from certain California wildfires from 2026 to 2036.

• Low-Income Housing Credits (Section 7): Increases state allocations for low-income housing tax credits in 2026 and 2027 by up to $8.25 per capita (based on 2025 population) for buildings in disaster zones. Extends the deadline for projects to be completed by 3 years (from 2) for designated amounts, prioritizing disaster recovery housing.

• Definitions (Section 8): Clarifies terms like "qualified disaster area" (areas with major disaster declarations), "qualified disaster zone" (sub-areas eligible for federal aid), and "incident period" (FEMA-specified disaster duration, extended up to 30 days post-enactment).

Significant Changes to Existing Law

• Amends the Internal Revenue Code (e.g., sections 24, 32, 72, 165, 170) to introduce temporary exceptions for 2025–2027, such as substituting prior-year income for credits, suspending charitable deduction caps, waiving early withdrawal penalties, and enhancing casualty loss rules—changes not previously available without specific disaster legislation.
• Builds on prior laws like the Federal Disaster Tax Relief Act of 2023 by extending wildfire exclusions and adding housing credit boosts.
• Treats disaster impacts as overriding standard limits (e.g., raising loan caps and deduction floors), with retroactive plan amendments allowed.

Potential Impacts

• On Citizens: Provides financial relief to disaster survivors by reducing tax liabilities on lost income, property damage, and recovery expenses; encourages charitable giving and access to savings; supports rebuilding affordable housing in affected areas, potentially speeding personal and community recovery.
• On Government Agencies: Increases administrative workload for the IRS (e.g., verifying elections, handling repayments) and Treasury (issuing guidance); may reduce federal tax revenue short-term due to higher deductions and credits, but aids long-term economic stabilization in disaster zones.
• On International Relations: No direct impacts, as provisions are domestic and U.S.-focused.

Main Stakeholders Affected

• Individuals and Families: Residents of disaster areas (especially in California, given sponsors), low-income earners, homeowners, and retirees accessing funds.
• Businesses and Nonprofits: Corporations and charities benefiting from expanded deductions; food donors and low-income housing developers gaining credits.
• State and Local Governments: Housing agencies allocating extra credits for recovery projects.
• Financial Institutions: Retirement plan administrators facilitating loans and distributions.

Notable Legal, Constitutional, or Political Implications

• Legal: Enhances taxpayer protections by treating disaster errors leniently and allowing retroactive compliance, potentially reducing disputes; relies on FEMA declarations for scope, ensuring targeted application without broad overreach.
• Constitutional: Aligns with Congress's taxing and spending powers under Article I; no apparent free speech, due process, or equal protection issues, as relief is tied to objective disaster criteria.
• Political: Introduced by California representatives amid frequent disasters (e.g., wildfires), it signals bipartisan support for regional recovery but could spark debates on federal spending priorities and equity for non-declared areas.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Chu, Judy [D-CA-28]

Cosponsors (30)

Rep. Sherman, Brad [D-CA-32], Rep. Thompson, Mike [D-CA-4], Rep. Pelosi, Nancy [D-CA-11], Rep. Aguilar, Pete [D-CA-33], Rep. Barragán, Nanette Diaz [D-CA-44], Rep. Brownley, Julia [D-CA-26], Rep. Carbajal, Salud O. [D-CA-24], Rep. Costa, Jim [D-CA-21], Rep. DeSaulnier, Mark [D-CA-10], Rep. Friedman, Laura [D-CA-30], Rep. Garamendi, John [D-CA-8], Rep. Garcia, Robert [D-CA-42], Rep. Jacobs, Sara [D-CA-51], Rep. Kamlager-Dove, Sydney [D-CA-37], Rep. Levin, Mike [D-CA-49], Rep. Liccardo, Sam T. [D-CA-16], Rep. Lieu, Ted [D-CA-36], Rep. Lofgren, Zoe [D-CA-18], Rep. Matsui, Doris O. [D-CA-7], Rep. Min, Dave [D-CA-47], Rep. Mullin, Kevin [D-CA-15], Rep. Panetta, Jimmy [D-CA-19], Rep. Peters, Scott H. [D-CA-50], Rep. Rivas, Luz M. [D-CA-29], Rep. Ruiz, Raul [D-CA-25], Rep. Sánchez, Linda T. [D-CA-38], Rep. Swalwell, Eric [D-CA-14], Rep. Takano, Mark [D-CA-39], Rep. Tran, Derek [D-CA-45], Rep. Whitesides, George [D-CA-27]

Recent Actions

• 2025-12-18: Referred to the House Committee on Ways and Means.
• 2025-12-18: Introduced in House
• 2025-12-18: Introduced in House

Bill Versions

• Disaster Survivors Tax Relief and Recovery Act — issued 2025-12-18 — PDF (25 pages)