A New Federal Tax Break for Disaster Victims, and Why Confluence Cannot Use It Yet

Congress has made it easier to write off what a disaster destroyed. Whether anyone in Somerset or Fayette County can use it for the August flood still depends on a declaration that has not come.

The Doug LaMalfa Federal Disaster Tax Relief Certainty Act, H.R. 5366, was signed into law this month. It lets taxpayers deduct personal casualty losses above $500 from a federally declared disaster without itemizing their return, and without clearing the usual requirement that losses top 10 percent of income.

That combination matters more than it sounds. The old rules effectively passed over the households with the least cushion, because anyone taking the standard deduction, which is most people, got nothing out of the casualty loss provision at all. This version reaches them. It covers federally declared disasters from late December 2019 through the end of 2026.

The catch is the word federal

The deduction only applies where the federal government has declared a disaster. Southern Somerset County does not have one for August 10 and 11.

The U.S. Small Business Administration has issued two disaster declarations for Pennsylvania this summer, and neither one includes us. The July declaration covers Bedford, Blair, Cambria, Centre, Clearfield and Huntingdon counties. A second, issued August 19 and corrected September 8, covers Clearfield County plus Blair, Cambria, Cameron, Centre, Clinton, Elk, Indiana and Jefferson. Somerset and Fayette are on neither list.

As reported here in August, county officials said the flood damage did not reach the roughly $24 million state threshold that unlocks aid. Rep. Carl Walker Metzgar, Sen. Pat Stefano and the Somerset County Emergency Management Agency have been pooling damage reports from Somerset and Fayette into one consolidated assessment, trying to clear together the bar that neither county could clear alone. No timeline has been announced.

Which makes your damage report worth more, not less

Here is the practical consequence. If that consolidated report eventually produces a federal declaration, this new deduction would apply to the August flood, because the law reaches disasters occurring through the end of this year. A declaration would no longer only open the door to grants and loans. It would also let flooded households take the loss off their taxes without itemizing.

So the ask from August stands, with more riding on it: get your damage on the record with the Somerset County EMA or Metzgar’s district office, including anything you turned up after your first report.

One other thing worth checking. If you had uninsured property damage in an earlier disaster that did carry a federal declaration, going back to late 2019, the new rules may reach that year, and an amended return may be worth asking about.

This is a tax question rather than a News & Views question, so talk to whoever does your return before you file anything. But it is a rare piece of good news attached to a bad August, and it is worth knowing it is sitting there.