Disaster Relief Payments: When They Are Not Taxable
Published November 6, 2026
After a disaster, you may get money. It may come from a government, an employer, or another source. Some of that money may not be taxable. Publication 525 (2025), Taxable and Nontaxable Income, explains the rules. The rules depend on the type of payment. Use the rules below to sort each payment. This guide is general information. It is not advice about your return.
Qualified disaster relief payments
You can exclude a qualified disaster relief payment from income. The publication says the payment is made to you in one of four ways.
- To pay back or cover reasonable and necessary personal, family, living, or funeral costs.
- To pay back or cover reasonable and necessary costs to repair or replace your home. This includes its contents.
- By a common carrier. This means a transportation business. The payment must be for death or physical injury.
- By a government, or its agency, to promote the general welfare.
Each payment must come from a qualified disaster. You can exclude only the part that insurance or another source did not pay.
There is one exception. The exclusion does not apply to anyone who took part in a terrorist action. That includes a conspirator. It also includes a representative of one.
What counts as a qualified disaster
There are three kinds.
- A disaster from a terrorist or military action.
- A federally declared disaster. The federal government has declared it.
- A disaster from an accident with a common carrier. Another event that the Secretary of the Treasury, or a delegate, finds catastrophic.
For item 4 above, a federal, state, or local authority must find that the disaster warrants government help.
Disaster mitigation payments
You can also exclude a qualified disaster mitigation payment. The publication says these are often paid soon after damage. The damage comes from a natural disaster. The payments help reduce harm from future disasters. State and local governments pay them. They follow the Stafford Act or the National Flood Insurance Act.
Remember this rule. You cannot raise your property's basis for improvements paid with these payments.
Wildfire relief payments
You may be able to exclude a qualified wildfire relief payment. These are amounts paid for expenses or losses. The loss must come from a qualified wildfire disaster.
A qualified wildfire disaster is a federal disaster. It was declared after December 31, 2014. It must come from a forest or range fire. Publication 547 has more detail.
East Palestine train derailment
Some amounts from the East Palestine, Ohio, train derailment may be excluded. The derailment happened on February 3, 2023.
The payment may come from a government agency. It may come from Norfolk Southern Railway. It may come from a related person. Publication 547 explains which payments count.
Simple steps
- List each payment you got after the disaster.
- Write down who paid it.
- Match each payment to the cost it covers.
- Check whether insurance paid the same cost.
- Keep award letters, receipts, and repair estimates.
Keep records that show what each payment covered. This is general good practice.
Quick check
Ask three questions. Was the payment made because of a qualified disaster? Did insurance or another source pay that same cost? Did you take part in a terrorist action? If you took part in one, the exclusion does not apply. Write your answers down and keep them with your records.
Losses from the disaster itself may have their own rules. See casualty and theft losses and Form 4684. Some retirement plan withdrawals after a federally declared disaster have separate rules. See Form 8915-F and qualified disaster distributions.
Upload your documents and answer a few simple questions to start your return.
Sources: Sources: IRS, Publication 525 (2025), Taxable and Nontaxable Income (https://www.irs.gov/pub/irs-pdf/p525.pdf); Publication 547 for details This is general information, not advice about your specific return.
