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Creates a new tax-favored savings account for homeowners to pay for home disaster mitigation and recovery. Individuals may contribute cash up to $4,500 per year (indexed for inflation after 2025); contributions are deductible, earnings grow tax-free, and qualifying withdrawals for the taxpayer's principal residence are tax‑free. Nonqualifying withdrawals are taxed as income and face an additional 20% tax, and the Treasury may require trustee reporting and issue regulations. The rules apply to taxable years beginning after December 31, 2024.
The bill creates a tax-favored READY account to encourage homeowner disaster preparedness and make mitigation/recovery funds more tax-efficient, but the modest deduction cap, strict cash/use rules and penalties, and administrative/coordination burdens limit benefits and could disadvantage lower-income homeowners.
Homeowners can deduct up to $4,500 per year for cash contributions to READY accounts, lowering taxable income for savings dedicated to home disaster mitigation and recovery.
Distributions used for qualified mitigation or unreimbursed disaster repairs are excluded from gross income, effectively making earnings tax-free when used for resilience or recovery work and encouraging homeowners to invest in protective upgrades.
Establishes tax, rollover, reporting, and trustee standards for READY accounts, creating an administrable, predictable tax-preferred savings vehicle similar to other accounts (helps savers and financial institutions plan and comply).
The $4,500 annual deduction cap may be too small for many homeowners facing large-scale mitigation or recovery needs, leaving significant costs uncovered and still subject to ordinary tax treatment.
Taxpayers face a 20% additional tax on distributions not used for qualified expenses, raising the cost of mistakes or repurposing funds and increasing financial risk for account holders.
Requiring cash-only contributions (except rollovers) and imposing trustee/administrator compliance requirements could limit account access for lower-income households and add administrative burdens for trustees and the IRS.
Introduced January 15, 2025 by Laurel Lee · Last progress January 15, 2025