Congress may limit disaster deduction

Congress is planning to limit taxpayers’ ability to write off losses from wildfires and other disasters.

The disaster write-off is one of the many little-known deductions that would be mostly wiped out in the Republican tax plan, but it’s getting new attention because of the fires that have recently devastated Wine Country and are now burning in Southern California.

The House tax bill would entirely eliminate the deduction that allows people to claim uninsured losses after all types of disasters. The Senate version would allow deductions only if the president declares a federal disaster.

House Majority Leader Kevin McCarthy’s 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.

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 incidents are 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.

The House tax bill does include a limited deduction for the victims of this year’s hurricanes in Texas and Florida. But it leaves out relief for the victims of recent big fires.

“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.