Protect Innocent Victims of Taxation After Fire Extension Act

This bill adds a new tax exclusion to the Internal Revenue Code, allowing individuals to exclude certain wildfire relief payments from their taxable income. It directly affects wildfire victims who receive compensation for losses like property damage, additional living expenses, or emotional distress from federally declared wildfires (after 2014), but only if the payments aren’t covered by insurance. The exclusion prevents double tax benefits by disallowing deductions for expenses already covered by the excluded payments, and it expires for payments received after December 31, 2032. The provision applies to payments received after December 31, 2025.