HR440-119

What This Bill Does

The READY Accounts Act creates Residential Emergency Asset-accumulation Deferred Taxation Yield accounts in the Internal Revenue Code. Individuals may deduct cash contributions to a READY account up to $4,500 per year, indexed for inflation after 2025 and rounded down to the nearest $50. The trust must be U.S.-created, administered by a bank or approved trustee, use cash contributions, avoid life insurance investments, keep assets separate except common funds, and give the beneficiary a nonforfeitable interest. Qualified expenses are for a taxpayer's principal residence and include disaster mitigation measures certified by a qualified industry professional under Treasury and FEMA criteria, such as roofing underlayment, roof covering replacement, foam adhesive roof reinforcement, roof deck and roof-to-wall strengthening, soffit and attic ventilation strengthening, impact-resistant windows and doors, home elevation, ground anchors, current building-code upgrades, and other approved measures. Qualified recovery costs are uninsured costs to repair fire, storm, or other casualty damage to the principal residence. READY accounts are generally tax-exempt; qualified distributions are excluded from income, nonqualified distributions are taxable and subject to an extra 20 percent tax, excess contributions have correction rules, rollovers are allowed once per year within 60 days, spousal transfers and death rules mirror retirement-style accounts, trustees must report contributions and distributions, Treasury must issue anti-abuse regulations, and casualty-loss deductions are denied to the extent costs were paid from READY accounts.

Who Benefits and How

Homeowners in disaster-prone areas benefit from a tax deduction for annual READY account contributions and tax-free qualified mitigation or recovery withdrawals. Homeowners upgrading roofs, windows, doors, elevation, ground anchors, or building-code compliance benefit from qualified mitigation treatment. Banks and approved account trustees benefit from a new tax-preferred savings account product. Contractors and qualified industry professionals benefit from demand for certified disaster mitigation work.

Who Bears the Burden and How

The Treasury Department must write READY account rules, reporting requirements, FEMA consultation criteria, and anti-abuse regulations. Account beneficiaries face income inclusion and a 20 percent additional tax on nonqualified distributions. Trustees must administer contribution limits, rollovers, reporting, investment restrictions, and beneficiary rules. Federal revenue officials lose tax receipts from deductible contributions and tax-free qualified distributions.

Key Provisions

• Creates READY accounts for principal-residence disaster mitigation and uninsured disaster recovery expenses.
• Provides an annual deduction up to $4,500, indexed after 2025 and rounded down to the nearest $50.
• Allows tax-free distributions for qualified roofing, opening protection, elevation, anchoring, building-code, and casualty-repair costs.
• Requires trustee reporting, Treasury-FEMA standards, excess-contribution rules, rollover rules, and a 20 percent tax on nonqualified distributions.