The US President Biden has signed The Federal Disaster Tax Relief Act of 2023 (H.R. 5863) and the VSO Equal Tax Treatment Act VETT Act (H.R. 1432) on 12 December 2024. These two bills provide significant tax relief measures to support disaster victims and veterans.

The “Federal Disaster Tax Relief Act of 2023” will provide tax relief concerning certain Federal disasters. Meanwhile, the “VSO Equal Tax Treatment Act”, or the “VETT Act”, amends the Internal Revenue Code of 1986 to provide for the deductibility of charitable contributions to specific organisations for Armed Forces members.

Federal Disaster Tax Relief Act of 2023

The Federal Disaster Tax Relief Act of 2023 extends disaster-related personal casualty loss provisions from the Taxpayer Certainty and Disaster Tax Relief Act of 2020. It allows taxpayers affected by federally declared disasters to deduct unreimbursed personal property losses from such events.

The Act excludes qualified wildfire relief payments from taxable income under the Internal Revenue Code (IRC) for federally declared wildfire disasters after 31 December 2014. This includes compensation for living expenses, lost wages, personal injuries, emotional distress, and other uninsured damages.

The Act also extends the statute of limitations for wildfire relief claims, giving taxpayers an extra year from the enactment date to file for refund claims.

The Act prohibits deductions or credits for expenses covered by a wildfire relief payment excluded from taxable income to prevent double benefits.

The exclusion applies to payments received for taxable years after 31 December 2019 and before 1 January 2026.

VSO Equal Tax Treatment Act (VETT Act)

The VETT Act expands the scope of tax deduction rules to include charitable contributions made to federally chartered veterans’ service organisations (VSOs) under IRC Section 501(c)(19). Previously, these organisations were not eligible for the same tax treatment as nonprofit organisations. The Act also adjusts percentage limitations under IRC Section 170(b)(1)(A) to align federally chartered VSOs with the deduction rules of other eligible charities.

These changes will take effect for taxable years starting after 12 December 2024.