Disaster Mitigation and Tax Parity Act of 2025

The Disaster Mitigation and Tax Parity Act of 2025 would provide federal income tax relief for homeowners who receive payments from state-run disaster mitigation programs. Currently, individuals can exclude certain disaster relief payments from federal income taxes under existing federal programs like the Stafford Act and the National Flood Insurance Act. This bill would extend that same tax exclusion to payments received from state catastrophe loss mitigation programs, joint powers authorities, or state-regulated property insurance entities.

Under the bill, homeowners would be able to exclude these state program payments from their taxable income when they use the money to make improvements to their property that reduce damage from windstorms, earthquakes, floods, or wildfires. For example, if a state program provides funds to help a homeowner install hurricane-resistant windows or reinforce a roof, that payment would not be counted as taxable income. The bill also specifies that these payments would not increase the property's tax basis, maintaining consistency with how federal disaster relief payments are currently treated.

The bill has passed the House and now requires approval from the Senate before it can become law. If enacted, it would help homeowners in states with their own disaster mitigation programs by reducing the federal tax burden associated with receiving those protective improvements, making it more affordable for families to strengthen their homes against natural disasters.