Flood Insurance Tax Credit Act of 2025
Summary
The Flood Insurance Tax Credit Act of 2025 aims to provide tax credits to individuals for expenses related to flood insurance. It amends the Internal Revenue Code of 1986 to introduce a new tax credit, Section 25G, specifically for flood insurance expenses. The credit covers federal flood insurance, private flood insurance, and federal contents coverage, subject to certain limitations and phaseouts based on income.
Expected Effects
This act would reduce the tax burden for homeowners who pay for flood insurance, incentivizing them to obtain coverage. The phaseout based on income means that the benefit is targeted towards lower and middle-income households. The changes would apply to taxable years beginning after December 31, 2025.
Potential Benefits
- Reduces the financial burden of flood insurance for homeowners.
- Encourages more homeowners to obtain flood insurance, potentially mitigating financial losses from flooding.
- Provides targeted tax relief to lower and middle-income households.
- Offers credits for both federal and private flood insurance, increasing consumer choice.
- Includes coverage for contents, further protecting homeowners' assets.
Most Benefited Areas:
Potential Disadvantages
- The tax credit is phased out for higher-income individuals, potentially creating resentment.
- The complexity of calculating the credit, with different limits and phaseouts, may confuse taxpayers.
- The overall cost to the government in terms of reduced tax revenue is not specified.
- May incentivize building in flood-prone areas due to reduced insurance costs.
- The act does not address the underlying issues of rising flood insurance premiums or flood risk mitigation.
Constitutional Alignment
The bill aligns with the Constitution's general welfare clause (Preamble). Article I, Section 8 grants Congress the power to lay and collect taxes, duties, imposts, and excises, to pay the debts and provide for the common defense and general welfare of the United States. This act falls under the power to lay and collect taxes.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).