Shelter Act Offers $15,000 Tax Credit for Disaster-Proofing Homes, But Only for Post-Disaster Zones

The 'Shelter Act' is a new piece of legislation designed to give homeowners and businesses a break when they invest in making their properties tougher against natural disasters—think high winds, floods, and wildfires. Starting in 2026, it creates two new federal income tax credits worth 25% of the money spent on specific resilience upgrades. This isn't small change: a homeowner could claim up to $3,750 in credit each year, with a lifetime cap of $15,000 per home. For businesses, the cap is set at $5,000 annually. The goal is to shift the focus from expensive disaster recovery to proactive, structural prevention.

The Catch: You Must Live in a Disaster Zone

Before you run out and install those impact-resistant windows, you need to check your address. The biggest hurdle in the Shelter Act is geographic eligibility. To qualify for either the personal or business credit, your property must be located in an area that has recently experienced a federal natural disaster declaration or received FEMA hazard mitigation assistance in the last five years. This means if you live in a high-risk area that hasn't had a major, declared disaster yet—or if you're next door to a recently affected zone but not in it—you are currently locked out of the incentive. This structure is intended to target the most vulnerable communities, but it leaves out property owners who are trying to get ahead of the risk before the declaration hits.

Homeowners: The Income Cliff

The personal credit (Section 2) is specifically designed to help regular folks, but it includes a strict income phase-out. The 25% credit starts shrinking once your adjusted gross income (AGI) hits $100,000, and it disappears completely at $150,000 ($200,000 to $300,000 for joint filers). This means the credit is primarily aimed at lower- and middle-income taxpayers. If you’re a dual-income household earning $250,000 annually, you won't see a dime of this credit, even if you spend $40,000 elevating your home to protect it from floods. It also means that the credit is nonrefundable. If you make improvements but don't have enough tax liability to use the credit, you can carry it forward for up to five years. For those with very low tax bills, however, this might not be enough to fully utilize the benefit, potentially creating an economic burden where they must front the entire cost and only recoup a small portion over time.

What Counts as an Upgrade?

The bill defines “qualified disaster mitigation expenditures” broadly, covering costs for materials and labor for things like strengthening roofs and foundations against high winds, installing impact-resistant windows, elevating utilities above flood levels, or creating defensible space against wildfires. Crucially, the work must comply with the latest building codes (allowing either of the two most recent published editions) and must address a hazard identified in your state’s local mitigation plan. For example, a homeowner in coastal Florida could get the credit for installing a safe room, while a homeowner in California could use it for fire-resistant landscaping and ignition-resistant materials.

The Business Side: Small Business Focus

Section 3 extends a similar 25% credit to businesses, capped at $5,000 per year. Like the personal credit, this is nonrefundable and geographically limited to disaster-affected areas. However, this credit is clearly aimed at small businesses. Companies with average annual gross receipts over $5 million in the prior three years will see their credit amount reduced. This means a local hardware store or a small manufacturing plant could get a financial boost for installing flood vents or better roofs, but a large regional corporation with multi-million dollar revenue will find the credit significantly diminished or phased out entirely. This focus ensures that the incentive money goes to local employers rather than large enterprises.