Thousands of survivors of the 2025 Eaton Fire in Altadena, California, have elected to accept a
n upfront settlement from the utility accused of causing it, forgoing future litigation for a faster payment that could help them rebuild or relocate.
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But unless a bill moving through Congress becomes law, that money could be taxed as income, t
aking big bites out of their payments and possibly disqualifying them from other government benefits.
“There was this terrifying disbelief,” Bree Jensen, communications director for the Eaton Fire Long-Term Recovery Group, said of informing fellow residents about the tax.
Thousands more who are suing the utility face the same prospect, as well as fire survivors in
Colorado, Hawaii and Oregon after a tax exemption on wildfire-related compensation expired at the end of 2025.
In recent years, Congress has shielded wildfire settlements from taxes, but legislation to do so was short-lived and a struggle to pass, leaving gaps between laws
that risk saddling some survivors with a possible tax burden on their compensation. A bipartisan House bill to extend the tax relief passed out of committee last month,
but the timeline for bringing it to a floor vote and when the Senate will take action are unknown, leaving survivors in financial limbo.
Related: Study: Rebuilding LA to Wildfire Safety Standards Could Lower Future Fire Losses
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“We have to assume we don’t have that money, so we’re making decisions, choosing cheaper materials, forgoing the solar,” said one Altadena homeowner, wh
o spoke on the condition of anonymity because she fears compromising her expected settl
ement of about $700,000. If that money counts as income, she expects taxes would take 37%.
The homeowner hoped accepting a settlement would get her family home faster, after she, her h
usband and their four pets spent more than a year hopping between relatives’ houses and rentals.
“All we wanted was to rebuild a comfortable house and get out of the situation we were in,” she said, adding their construction costs alone are estimated to reach $1 million.
As survivors watch lawmakers lock horns over the Iran war and the record-long Department of Homeland Security shutdown, some worry extending disaster t
ax relief will be de-prioritized.
“People have low expectations of anything actually getting done,” said Jenn Kaaoush, a 2021 Marshall Fire survivor and town council member in Superior, Colorado.
