Disaster Mitigation and Tax Parity Act of 2025

The Disaster Mitigation and Tax Parity Act of 2025 would extend federal income tax benefits to homeowners who receive payments from state-run disaster mitigation programs. Currently, individuals can exclude certain disaster relief payments from federal income taxes if those payments come from federal programs like the Stafford Disaster Relief Act or the National Flood Insurance Act. This bill would create similar tax treatment for payments from state catastrophe loss mitigation programs, joint powers authorities, or state-regulated property insurance entities.

Under the bill, homeowners could exclude from their taxable income any payments received from these state programs that are used to make improvements to their property specifically designed to reduce damage from windstorms, earthquakes, floods, or wildfires. The payments would not increase the property's tax basis, consistent with how federal disaster relief payments are currently treated. If enacted, this would provide tax parity between homeowners receiving mitigation assistance through state versus federal programs, potentially encouraging more property owners to invest in disaster-resistant improvements.