Tax,
LA Fires
Jul. 23, 2025
Wildfire settlements face a tax crosswind
In a major shift, California's 2025 budget legislation expanded wildfire recovery tax relief beyond specific named fires, but only for payments received through a class action "settlement entity," leaving many victims -- especially of recent fires like the 2025 LA fires -- uncertain about whether their recoveries will be tax-free under either federal or state law after 2025.
Robert W. Wood
Managing Partner
Wood LLP
333 Sacramento St
San Francisco , California 94111-3601
Phone: (415) 834-0113
Fax: (415) 789-4540
Email: wood@WoodLLP.com
Univ of Chicago Law School
Wood is a tax lawyer at Wood LLP, and often advises lawyers and litigants about tax issues.
It was huge news in December 2024 when Congress passed a tax law to make many wildfire settlements tax free. The law expires at the end of 2025, and there's no sign of it being amended to cover 2026 and later recoveries. That's a worry for recent fires such as the LA fires of 2025. Litigation usually takes years to resolve.
As for California taxes, state law
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