Sponsors (9)
The bill creates a tax‑favored READY account to help homeowners save for and pay for certified disaster mitigation and recovery—boosting household resilience and reducing after‑tax costs—while reducing federal revenue, adding administrative complexity, and providing larger benefits to those with upfront savings.
Homeowners can deduct up to $4,500 per year by saving cash in READY accounts to pay for qualifying home disaster mitigation and recovery costs, lowering their taxable income for those contributions.
Distributions from READY accounts used for qualified mitigation or recovery are tax‑free, reducing the after‑tax cost of resilient home upgrades and repairs for participating households.
Homeowners (and state partners) are incentivized to undertake preventive mitigation (e.g., improved roofing, structural reinforcement) because the tax‑favored savings apply specifically to FEMA‑certified mitigation measures, encouraging resilience and potentially lowering future disaster costs.
Low‑income homeowners who lack cash to make up‑front certified mitigation investments may be unable to take full advantage of the deduction and tax‑favored distributions, leaving the benefit skewed toward those with available savings.
The new deduction and tax‑favored account will reduce federal revenues, creating potential pressure to cut spending, raise other taxes, or increase deficits.
Taxpayers who take nonqualified distributions face ordinary income inclusion plus a 20% additional tax on includible amounts, creating a significant penalty risk if funds are used improperly.
Based on analysis of 2 sections of legislative text.
Creates READY tax‑preferred accounts allowing an annual deduction (up to $4,500, indexed) for funds used for certified home disaster mitigation and recovery, with tax and penalty rules for nonqualified use.
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-preferred savings account called a READY (Residential Emergency Asset‑accumulation Deferred Taxation Yield) account that lets individuals deduct up to $4,500 per year for cash deposited to pay for home disaster mitigation and disaster recovery costs. READY accounts are tax-exempt while funds are used for qualified mitigation or recovery, allow rollovers, and impose a 20% additional tax on nonqualified distributions; the rules take effect for taxable years beginning after December 31, 2024. The bill adds detailed definitions, reporting and regulatory authority, and integrates READY accounts into existing tax rules (including excess contribution and prohibited-transaction provisions) with inflation indexing of the deduction after 2025 and several technical conforming amendments to the Internal Revenue Code.