FIREWALL Act Offers $25,000 Refundable Tax Credit for Home Disaster Proofing Starting 2025

The Facilitating Increased Resilience, Environmental Weatherization And Lowered Liability (FIREWALL) Act introduces a major new incentive for homeowners to disaster-proof their property. Specifically, Section 2 creates a refundable personal tax credit for making "qualified disaster mitigation expenditures" on your primary residence. Think of it as the government offering to split the bill with you if you make your home safer from things like wildfires, floods, and hurricanes.

The 50% Off Deal: How the Credit Works

Starting in the 2025 tax year, if you spend money on eligible mitigation work, you can claim a credit equal to 50% of those costs. The best part? This credit is refundable. That means if you spend $10,000 on a new fire-resistant roof and qualify for a $5,000 credit, you get that $5,000 back even if you didn't owe $5,000 in taxes. This is huge because it puts cash directly back into your pocket, regardless of your tax liability.

There is a lifetime cap of $25,000 on the total credit you can claim per home. So, you could claim $5,000 this year, $10,000 next year, and still have $10,000 left for future upgrades. This cap, along with the income thresholds, will be adjusted for inflation starting after 2025. However, if your Adjusted Gross Income (AGI) is over $200,000, your maximum credit starts to shrink. The bill is clearly aiming this substantial benefit at middle- and lower-income homeowners, recognizing that high-income earners likely don't need the same level of incentive.

What Counts as a "Qualified" Upgrade?

The list of eligible improvements is surprisingly broad and detailed, covering everything from the roof down to the foundation. This isn't just about putting up a tarp—it's about serious structural protection. For instance, you can claim costs for: reinforcing your roof connections and adding secondary water barriers; elevating your home and utilities above the base flood line; installing seismic upgrades like bracing cripple walls; or creating defensible space around your home by replacing flammable landscaping with fire-resistant materials.

Crucially, your home must be located in an area that has experienced a federal natural disaster declaration (fire, flood, windstorm, etc.) within the last 10 years, or an area that has recently received FEMA hazard mitigation assistance. This ensures the funds are directed where the risk is highest. One major limitation to note: you can’t claim the credit for any expense that was already paid for or reimbursed by any government entity (federal, state, or local). No double-dipping allowed.

The Real-World Catch-22 and the Fine Print

While the credit is a massive incentive, there are two practical challenges for everyday people. First, you have to pay the full cost upfront and wait for the tax return to get the 50% back. For a $30,000 roof replacement, you still need $30,000 in cash or financing today. This upfront cost could be a significant barrier for the lower-income households who often need these resilience upgrades the most.

Second, the bill includes a technical requirement that often gets overlooked: if you claim this credit, you must reduce the cost basis of your property by the amount of the credit claimed. Cost basis is what you use to calculate capital gains when you eventually sell your home. If you claim a $25,000 credit, your cost basis is reduced by $25,000, which means your taxable profit (capital gain) upon selling the house will be $25,000 higher. It’s a trade-off: immediate cash back now versus a potentially higher tax bill much later. This is something homeowners need to factor into their long-term financial planning.