Sponsors (11)
The bill encourages household investment in disaster resilience by creating tax-favored READY accounts and related rules, but it mainly helps homeowners with spare cash, reduces federal revenue, and adds administrative and penalty risks that could limit equitable access.
Homeowners can save for and pay qualifying disaster mitigation and recovery costs with tax-favored READY accounts: contributions are deductible (up to $4,500/year) and qualified distributions are tax-free, lowering the after-tax cost of resilient home upgrades and repairs.
Homeowners and state governments are incentivized to pursue preventive mitigation (e.g., improved roofing, reinforcements) because READY account benefits apply to measures certified with FEMA consultation, promoting resilience and potentially reducing future disaster losses.
Account rollovers and spousal transfer rules preserve tax benefits on transfers and after divorce or death, protecting family continuity of mitigation savings.
Low-income homeowners who cannot afford upfront certified mitigation measures are unlikely to benefit fully from the deduction because they lack cash to contribute, limiting equity and leaving vulnerable households with less access to resilience funding.
The new deduction will reduce federal revenues, potentially increasing pressure on federal spending priorities or other taxes.
Taxpayers who take nonqualified distributions face ordinary income inclusion plus a 20% additional tax on the includible amounts, creating a substantial penalty risk for mistakes or misuse.
Based on analysis of 2 sections of legislative text.
Creates tax-advantaged READY accounts with an annual deduction (up to $4,500) for funds used for home disaster mitigation and FEMA-certified recovery costs, with tax-free qualified distributions.
Official title: To amend the Internal Revenue Code of 1986 to provide for Residential Emergency Asset-accumulation Deferred Taxation Yield (READY) accounts.
Introduced January 15, 2025 by Laurel Lee · Last progress January 15, 2025
Creates a new tax-advantaged savings vehicle called a READY account that lets individuals deduct up to $4,500 per year (indexed for inflation after 2025) for cash contributions to accounts used for qualified home disaster mitigation and disaster recovery expenses. While funds remain in a READY account and are used for qualified purposes, earnings and distributions are tax-free; nonqualified distributions are taxable and subject to an additional 20% tax on includible amounts. The proposal adds detailed rules for account definition, eligible uses (with FEMA consultation and certification for disaster recovery), trustee/beneficiary treatment, rollover and reporting rules, and applies several existing IRA-like tax rules and penalties to READY accounts. The changes take effect for taxable years beginning after December 31, 2024.