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Would You Prepare Your Home For A Disaster If It Were Tax Deductible?
Oct 21, 2013

Wherever you may stand on the climate change debate (cue the angry comments!), it’s undeniable that Mother Nature has grown a bit unpredictable in exacting her revenge for hairspray and Styrofoam. Superstorms in New Jersey. Mudslides in Colorado. Cyclones in India. But while we may not know where the next natural disaster is going to hit, one House Republican is doing his best to encourage people to be prepared.

Dennis Ross (R-FL) recently sponsored H.R. 3298, a bill that would permit taxpayers to deduct the cost of amounts contributed to a savings account to help ready their homes for the next natural disaster.

It works like this: Each year, an “eligible individual,” would be permitted to deduct up to $5,000 contributed to a designated “disaster savings account.” An eligible individual is defined as any individual who owns a home in the U.S. that is insured. A disaster savings account would be a trust created in the U.S. exclusively for the purpose of paying disaster mitigation expenses of the trusts beneficiary.

The definition of “disaster mitigation expenses” is where things get interesting. The proposed law defines the term as expenses for any of the following:

  • Safe rooms.
  • Opening protection, including impact and wind resistant windows, exterior doors, and garage doors.
  • Reinforcement of roof-to-wall and floor-to-wall connections for wind or seismic activity.
  • Roof covering for impact, fire, or high wind resistance.
  • Cripple and shear walls to resist seismic activity.
  • Flood resistant building materials.
  • Elevating structures and utilities above base flood elevation.
  • Fire resistant exterior wall assemblies/systems.
  • Lightning protection systems.
  • Whole home standby generators.
  • Any activity specified by the Secretary as appropriate to mitigate the risks of future hazards (including earthquake, flood, hail, hurricane, lightning, power outage, tornado and wildfire) and other natural disasters.

Any amounts withdrawn from the account and used for a qualifying expense would not be included in taxable income. Obviously, amounts distributed for other purposes would be included in taxable income, with an extra 20% excise tax tacked on for good measure.

While the bill is certainly well-intentioned, good ol’ Gov Track is not optimistic, giving H.R. 3298 a 0% chance of being enacted.