What changed — and why it matters to trucking
Federal tax treatment of wildfire-related payments has flipped for 2026. The special federal income tax exclusion for “qualified wildfire relief payments” expired at the end of 2025. That temporary break covered payments received in tax years beginning after December 31, 2019, and before January 1, 2026. For owner-operators and fleets that may receive 2026 settlement checks tied to past fires, those amounts are now taxable at the federal level unless another code section applies.
Payment date — not disaster year — controls
The critical factor is when the money hits your account. Under the Federal Disaster Tax Relief Act of 2023, qualified wildfire relief payments received between January 1, 2020, and December 31, 2025 could be excluded from federal income. Payments received on or after January 1, 2026 do not qualify for that exclusion, even if the underlying wildfire occurred years earlier.
What counted as “qualified wildfire relief” during 2020–2025
- Unreimbursed additional living expenses.
- Certain lost wages (but not regular wages your employer would have paid).
- Compensation for personal injury, death, or emotional distress.
Taxpayers could not take deductions, credits, or basis increases for expenses paid with excluded funds. These definitions matter when reviewing prior filings or responding to IRS notices about earlier years.
Key deadlines you’ve already faced — and what’s next
- Amending 2020–2021 returns: Congress gave extra time to fix returns that incorrectly treated qualified wildfire payments as taxable. That special window closed on December 12, 2025.
- Amending 2022–2025 returns: You can still amend under the regular statute of limitations (generally three years from the original filing date), if you reported qualified payments as income and now need a refund.
What relief still exists in federally declared disasters
The end of the wildfire payment exclusion does not eliminate broader disaster tax relief. When a federal disaster is declared, the IRS can still postpone certain filing and payment deadlines and allow casualty-loss deductions for eligible damage to equipment, terminals, or facilities. For transportation businesses, those provisions can help offset out-of-service time and unexpected repair costs.
Action steps for fleets and owner-operators
- Budget for tax on 2026 receipts. If you expect a wildfire-related settlement or grant this year, treat it as taxable and adjust quarterly estimates to avoid underpayment penalties.
- Scrutinize Forms 1099-MISC. Settlement administrators often issue 1099s; reconcile what’s reported to you with what’s actually taxable now that the exclusion has sunset.
- Document asset damage and repairs. If you suffered equipment or facility losses in a federally declared disaster, keep detailed records (photos, repair invoices, insurance statements) to support any casualty-loss claim.
- Coordinate payroll and settlement timing. If drivers or staff are receiving individual payments, align payroll withholding and year-end reporting with your tax advisor.
- Ask about alternative code sections. Depending on facts, other provisions (for example, casualty losses or involuntary conversion rules) may soften the tax hit. A trucking-savvy CPA can map options to your cash flow and equipment plans.
State taxes may differ
State treatment isn’t uniform. For example, California continues to exclude certain qualified wildfire settlement amounts from state income through 2029, even though those payments are taxable for federal purposes in 2026 and later. If you run lanes or maintain terminals in multiple states, confirm each state’s rules before you set reserves.
The bottom line
For trucking companies and independent drivers, the federal tax-free window for wildfire relief payments is closed. Payments received on or after January 1, 2026 are generally taxable, so plan your estimates, cash flow, and records accordingly — and revisit 2022–2025 filings if you’re still eligible to amend. The rest of the IRS disaster toolkit remains in play, but the easy federal exclusion for wildfire money is gone.
Sources Consulted: CliftonLarsonAllen (CLA); Internal Revenue Service; Congress.gov; California Franchise Tax Board.
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This article was prepared exclusively for truckstopinsider.com. For professional tax advice, consult a qualified professional.
