Extension and modification of limitation on casualty loss deduction

(a) In general Section 165(h)(5) is amended— (1) in subparagraph (A), by striking, and before January 1, 2026, and (2) by striking 2018 through 2025 in the heading and inserting beginning after 2017. (b) Extension to State declared disasters (1) In general Subparagraph (A) of section 165(h)(5), as amended by subsection (a), is further amended by striking (i)(5)) and inserting (i)(5)) or a State declared disaster. (2) Exception related to personal casualty gains Clause (i) of section 165(h)(5)(B) is amended by striking (as so defined) and inserting (as so defined) or a State declared disaster. (3) State declared disaster Paragraph (5) of section 165(h) is amended by adding at the end the following new subparagraph: (C) State declared disaster For purposes of this paragraph— (i) In general The term State declared disaster means, with respect to any State, any natural catastrophe (including any hurricane, tornado, storm, high water, wind-driven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the State, which in the determination of the Governor of such State (or the Mayor, in the case of the District of Columbia) and the Secretary causes damage of sufficient severity and magnitude to warrant the application of the rules of this section. (ii) State The term State includes the District of Columbia, the Commonwealth of Puerto Rico, the Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.. (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025.