This bill allows homeowners to exclude from their gross income any payments they receive from state programs designed to help them improve their property to mitigate damage from disasters like windstorms, earthquakes, or wildfires.
Doug LaMalfa
Representative
CA-1
The Disaster Mitigation and Tax Parity Act of 2025 allows individuals to exclude from their gross income any payments or benefits they receive from state-based catastrophe loss mitigation programs designed to help homeowners protect their properties from disasters such as windstorms, earthquakes, or wildfires. These payments will not affect the property's basis, and the exclusion is applicable retroactively for taxable years starting after December 31, 2020, allowing individuals to claim the exclusion retroactively.
Tax Break for Homeowners: Disaster-Proofing Upgrades Won't Be Taxed, Retroactive to 2021
The Disaster Mitigation and Tax Parity Act of 2025 basically gives homeowners a tax break for making their homes safer from natural disasters. If you get money from a state program to, say, reinforce your roof against hurricanes or install fire-resistant landscaping, that money won't count as taxable income. Think of it like this: the government wants you to disaster-proof your place, so they're not going to tax you on the help they give you to do it.
Making Homes Safer, One Tax Break at a Time
The core of this bill is about excluding "qualified catastrophe mitigation payments" from your gross income. (Section 2). This means any funds you receive through a state-run program aimed at reducing damage from windstorms, earthquakes, or wildfires are tax-free. Crucially, this isn't just for future upgrades. The bill applies retroactively to taxable years starting after December 31, 2020. So, if you've already made eligible improvements and received state funding, you might be able to amend your previous tax returns.
Real-World Impact: Retroactive Relief and Future-Proofing
Let's say you live in Florida and received $5,000 from a state program in 2022 to install hurricane shutters. Under this bill, that $5,000 wouldn't be added to your taxable income. Or, if you're in California and got a grant to clear brush around your property to reduce wildfire risk, that's also excluded. The bill specifically mentions improvements to reduce damage from windstorms, earthquakes, and wildfires (Section 2). This could translate to significant tax savings for homeowners who've taken proactive steps to protect their properties.
It's also worth noting that these payments don't increase the basis of your property (Section 2). Normally, when you make significant improvements to your home, it increases its "basis," which can affect capital gains taxes when you sell. This bill keeps things simple: the money you receive for disaster mitigation is tax-free, and it doesn't complicate your future tax situation.
The Bigger Picture: Encouraging Preparedness
By offering this tax exclusion, the bill aims to incentivize more homeowners to invest in disaster mitigation. It acknowledges that these upgrades can be costly, and the tax break helps offset some of that financial burden. Long-term, this could lead to more resilient communities and potentially lower disaster recovery costs. While it's a clear win for homeowners, it's also a smart move for states prone to natural disasters. The requirement that the programs be state-based means that the funds are channeled through established channels, which provides some level of oversight. However, it also means that the availability of these tax breaks will depend on whether your state has such a program in place.