READY Accounts ActThis bill establishes a new Residential Emergency Asset-accumulation Deferred Taxation Yield (READY) account, allows individuals to make tax-deductible contributions of up to $4,500 per year to such accounts (adjusted annually for inflation), and allows individuals to take tax-free distributions from such accounts to pay for qualified home disaster mitigation and recovery expenses related to a principal residence owned by the taxpayer.Under the bill, qualified home disaster mitigation expenses include expenses certified by a qualified industry professional as meeting criteria to mitigate damage from a natural or other disaster, includinginstalling a roofing underlayment to sheathing, impact-resistant windows, impact-resistant entry doors, or ground anchors;replacing a roof covering;applying a foam adhesive to reinforce the roof structure;strengthening the connection of the roof deck to roof framing, roof-to-wall connections, soffits, or attic ventilation openings;elevating a residence; orachieving the current building code standard.Qualified home disaster recovery expenses include costs for repairing damage to a residence resulting from fire, storm, or other casualty (provided such costs are not reimbursed).Distributions from a READY account used for anything other than qualified home disaster mitigation and recovery expenses must be included in gross income and are subject to a 20% penalty. (Some exceptions apply.)Finally, the bill imposes a 6% tax on contributions in excess of the annual limit. (Some exceptions apply.)
The introduction of READY accounts is expected to have a substantial impact on state laws related to taxation and disaster preparedness. By providing tax deductions for contributions to these accounts, the legislation aims to assist individuals in accumulating funds that can be used exclusively for mitigating damage from disasters or for recovery costs that arise from such events. This represents a shift towards proactively managing risks associated with natural disasters within the framework of the Internal Revenue Code. Additionally, the bill outlines specific criteria for what constitutes qualified expenses, which will influence homeowners' choices on improvements related to disaster resilience.
House Bill 440, known as the READY Accounts Act, aims to amend the Internal Revenue Code to establish Residential Emergency Asset-accumulation Deferred Taxation Yield (READY) accounts. This bill allows individuals to deduct contributions made to these accounts, which are specifically designed to fund disaster mitigation and recovery expenses for eligible residential properties. Individuals can deduct up to $4,500 per taxable year, with adjustments for inflation in subsequent years. The intent behind this financial incentive is to encourage homeowners to prepare for and recover from natural disasters effectively.
A notable point of contention around this bill may arise from those who question the effectiveness of attaching tax benefits to individual savings behaviors, particularly concerning disaster preparedness. Critics might argue that while the tax incentives foster good intentions, they could fall short in ensuring comprehensive community-wide disaster readiness. Furthermore, the criteria for what qualifies as a disaster mitigation measure could lead to debates over its specificity, thus potentially limiting access for some homeowners. Although the bill sets a path for significant support in disaster preparedness, its implementation and impact will rely heavily on public adoption and understanding of the new financial tools provided.