Federal Tax Law Changes in 2026: What Taxpayers, Educators, Disaster Victims, and Clergy Members Should Know

Federal tax laws continue to change, and new legislation can affect how income is reported, which expenses may be deducted, and what options taxpayers have when dealing with the IRS.

Several important federal tax developments in 2026 address situations that affect individuals and families directly. These include tax relief for wildfire victims, expanded deductions for early childhood educators, stronger protections when the IRS corrects tax returns, and a new opportunity for certain clergy members to reconsider an earlier decision to opt out of Social Security coverage.

Understanding these changes can help taxpayers avoid missed deductions, recognize potential tax benefits, and make informed financial decisions.

1. Tax Relief for Wildfire Victims and Individuals Affected by Major Disasters

The Doug LaMalfa Federal Disaster Tax Relief Certainty Act, signed into law on September 11, 2026, provides important tax relief for individuals affected by certain wildfires and federally declared disasters.

One of the law’s key provisions concerns payments received by individuals who suffered losses because of qualifying wildfires.

Certain wildfire relief payments are excluded from taxable income

Under the new law, qualifying payments received by individuals for wildfire-related losses generally do not have to be included in federal taxable income.

These payments may cover expenses and damages such as:

• Additional living expenses, including temporary housing.
• Lost wages, with an exception for wages paid by an employer that would otherwise have paid them.
• Personal injuries or death.
• Emotional distress.
• Other qualifying losses and expenses resulting from the wildfire.

The exclusion applies to qualifying federally declared disasters resulting from forest or range fires declared after December 31, 2014, and before January 1, 2027.

However, taxpayers cannot exclude amounts that compensate them for losses already covered by insurance or another source. They also cannot claim a separate deduction or credit for expenses to the extent those expenses were covered by tax-free payments.

This provision may be particularly relevant to individuals who received wildfire settlement payments after a lengthy claims process and are unsure whether those payments must be reported as taxable income.

More favorable deductions for disaster-related losses

The law also extends favorable federal tax treatment for certain personal losses resulting from major federally declared disasters.

For qualifying disaster losses, taxpayers may generally claim a deduction without having to meet the usual requirement that the loss exceed 10% of adjusted gross income. The law also allows qualifying disaster losses to be deducted even by taxpayers who do not itemize their deductions.

The minimum reduction applied to a qualifying disaster loss is generally $500 per event, rather than the usual $100 threshold.

These provisions apply to qualifying disasters occurring during the period beginning December 28, 2019, and ending before January 1, 2027.

Why this matters: Individuals who experienced significant property damage or received wildfire-related settlement payments should review how those amounts were reported and whether the new rules affect their federal tax returns. The treatment of each payment and loss depends on the circumstances, including insurance reimbursements and other compensation received.

2. Educator Tax Deduction Expanded to Include Early Childhood Educators

A federal law signed on September 18, 2026, expanded the educator expense deduction to include qualifying early childhood educators.

Previously, the above-the-line educator expense deduction was generally available to eligible teachers and other school employees working in kindergarten through grade 12. The change extends eligibility to certain professionals working with younger children.

For the 2026 tax year, eligible educators may deduct up to $350 in qualifying unreimbursed expenses when calculating adjusted gross income. The deduction is available even if the taxpayer takes the standard deduction.

Qualifying expenses may include:

• Books and classroom supplies.
• Computer equipment, software, and related services.
• Other equipment and educational materials.
• Certain professional development courses.

Who qualifies?

Eligible educators generally include teachers, instructors, counselors, principals, and aides who work at least 900 hours during a school year.

For early childhood educators, the school or childcare facility must provide educational or childcare services to more than two children under age six who do not reside at the facility. The facility must operate at public expense or receive a fee, payment, or grant for providing those services. For-profit childcare facilities may also qualify.

The law applies to qualifying expenses paid or incurred in tax years beginning after December 31, 2025.

There may also be an opportunity for educators who itemize deductions to claim additional qualifying expenses beyond the amount claimed as the above-the-line deduction, subject to the applicable rules. The same expense cannot be deducted twice.

Why this matters: Early childhood educators who previously could not claim the federal educator expense deduction may now qualify. Teachers and other eligible school employees should also review their unreimbursed professional expenses to determine whether they can claim the available deductions.

3. New IRS Requirements for Math and Clerical Error Notices

Taxpayers sometimes receive notices from the IRS stating that their tax return contains a mathematical or clerical error. These corrections can result in additional tax being assessed, a reduced refund, or changes to other amounts reported on the return.

The Internal Revenue Service Math and Taxpayer Help Act, signed into law on November 25, 2025, introduces additional requirements intended to make these notices more informative and give taxpayers clearer ways to challenge an incorrect adjustment.

The new notice requirements apply to notices sent after November 25, 2026.

More detailed explanations from the IRS

Under the new requirements, the IRS must explain the specific mathematical or clerical error in plain language. The notice must identify the type of error, the relevant tax law provision, and the specific line of the tax return where the error occurred.

The IRS must also provide an itemized explanation of the resulting adjustments, including changes to taxable income, deductions, credits, total tax, refunds, or amounts owed, as applicable.

This is important because taxpayers need to understand not only that the IRS changed their return, but also why the change was made and how it affects their tax liability.

Clearer procedures to challenge an IRS adjustment

The law also requires the IRS to establish procedures allowing taxpayers to request an abatement of tax assessed because of a math or clerical error.

Requests may be submitted in writing, electronically, by telephone, or in person, subject to IRS procedures.

In addition, the law directs the IRS to implement a pilot program under which a statistically significant portion of math or clerical error notices will be sent by certified or registered mail with electronic signature confirmation.

Why this matters: A taxpayer should not automatically assume that an IRS adjustment is correct. Even a notice describing a mathematical error can affect the amount of tax owed, available credits, or future tax calculations. Reviewing the notice, comparing it with the original return, and responding within the applicable deadline can help prevent an incorrect assessment from going unchallenged.

4. Clergy Members Receive a New Opportunity to Rejoin Social Security

The Clergy Act, signed into law on October 20, 2026, creates a limited opportunity for certain clergy members and religious workers to reverse a previous decision to opt out of Social Security coverage.

Under the previous rules, eligible clergy members could apply for an exemption from Social Security and Medicare taxes on qualifying ministerial earnings based on religious or conscientious objections. Once the IRS approved the exemption, the decision was generally irrevocable.

As a result, some clergy members who opted out earlier in their careers later found that their ministerial earnings were not generating Social Security credits toward retirement benefits.

The new law provides another opportunity for eligible individuals to revoke their previously approved exemption.

What does the new law allow?

Eligible ministers, members of religious orders, and Christian Science practitioners who had an approved exemption in effect when the law was enacted may apply to revoke it.

The revocation can take effect for either the 2029 or 2030 tax year, as specified in the application. Once the election is made, the individual generally cannot apply for the exemption again.

Clergy members who revoke their exemption will become subject to self-employment tax on their qualifying ministerial earnings for the applicable year and subsequent years.

The application deadline is tied to the due date of the individual’s federal income tax return for the second taxable year beginning after December 31, 2028. For most calendar-year taxpayers, this is expected to be April 15, 2031, subject to applicable extensions and IRS procedures.

Why this decision deserves careful consideration

Rejoining Social Security may allow eligible clergy members to earn Social Security credits through their ministerial work and potentially qualify for retirement, disability, or survivor benefits.

However, the decision also means taking on additional self-employment tax obligations. The financial impact depends on the individual’s age, earnings, existing Social Security work history, retirement plans, and expected future income.

This is not simply a tax filing decision. It can affect long-term retirement planning and should be evaluated carefully before an application is submitted.

How These Federal Tax Changes May Affect Your Tax Planning

Although these four developments address different situations, they share an important point: changes in tax law can create opportunities, but taxpayers must meet specific eligibility requirements to benefit from them.

A wildfire settlement payment may be excluded from income, but only if it meets the legal requirements. An educator may qualify for additional deductions, but only for eligible unreimbursed expenses. An IRS adjustment may be challenged, but deadlines and response procedures matter. A clergy member may have an opportunity to rejoin Social Security, but the decision can create long-term tax and retirement consequences.

At Velin & Associates, Inc., we help individuals, families, and business owners understand how federal tax law changes affect their tax returns and financial decisions.

Our services include tax return preparation and review, tax planning, IRS notice assistance, and analysis of complex tax situations. We work to identify applicable deductions, evaluate tax exposure, and help clients address tax matters before they become more costly problems.

If you have received a settlement payment, incurred disaster-related losses, have questions about newly available deductions, or received an IRS notice, a professional review can help determine how the applicable tax rules affect your situation.

Contact Velin & Associates, Inc. to discuss your tax situation and determine whether these federal tax law changes may affect your 2026 tax planning or future filings.

Velin & Associates, Inc.

8159 Santa Monica Blvd STE 198/200
West Hollywood, CA 90046
📞 323-902-1000
📧 dmitriy@losangelescpa.org

This article is for general informational purposes only and does not constitute tax or legal advice. Eligibility for deductions, exclusions, and other tax benefits depends on individual circumstances, applicable law, and IRS guidance. Consult a qualified tax professional before making tax elections or filing a claim. CPA for YouTubers | CPA for Shopify Store | CPA for Commerce | CPA for Creators | Shopify Store CPA | CPA for Filmmakers | CPA for Amazon Business | Amazon Business CPA | CPA for Dental Practice | Dentist CPA | Dental Business CPA | Online Commerce CPA | CPA for Doctors | CPA for Medical Practice | CPA for High Net Worth Individuals | Tax Services Healthcare | Tax Services for a Business | Tax Services TikTok | Tax Services for Commerce | Tax Services Los Angeles | Bookkeeping and Tax Services | Tax Preparation | Accounting Firm | Tax Services for Doctor | Tax Services for Entertainment | Online CPA | CPA Los Angeles