HB6763 creates a nonrefundable personal tax credit equal to 25% of qualified disaster mitigation expenditures, with annual and per-dwelling caps and an AGI-based phaseout. It also establishes a parallel business credit of 25% for qualified expenditures, capped at $5,000 per year and subject to a separate phaseout tied to average gross receipts.
The bill defines a broad list of eligible mitigation measures and ties eligibility to location-based hazard conditions and compliance with consensus-based standards. Finally, it includes conforming tax code edits and an effective date for tax years beginning after 2025.
At a Glance
What It Does
The bill provides a 25% credit against tax for qualified disaster mitigation expenditures, with annual caps for individuals and joint filers and a separate per-dwelling cap. It also creates a business credit of 25% with its own cap and phaseout.
Who It Affects
Homeowners with qualified dwellings in eligible disaster-prone areas, rental property owners, and businesses with qualifying places of business. Contractors and installers performing mitigation work are also in the stream of beneficiaries.
Why It Matters
It creates a structured, incentives-based approach to resilience investments, potentially reducing future disaster losses and shaping how households and small businesses invest in protection.
More articles like this one.
A weekly email with all the latest developments on this topic.
What This Bill Actually Does
The Shelter Act adds two tax credits to encourage disaster-mitigation investments. For individuals, the credit is 25% of qualified expenditures, but limited to $3,750 per person or $7,500 for a joint return each year, and a lifetime cap of $15,000 per qualified dwelling unit.
The credit is phased down for higher-income taxpayers, with inflation adjustments starting after 2026 and rounding rules to keep values simple. Labor and inspection costs related to mitigation work count toward the credit, and the bill allows unused credits to carry forward for five years.
A separate business credit of 25% with a $5,000 cap (subject to a phaseout based on average gross receipts) mirrors the personal credit but is limited to business-related expenditures at a qualifying place of business. Both personal and business credits cannot be stacked for the same expenditures and require documentation.
The bill also defines a long list of eligible mitigation measures—ranging from roof strengthening to flood-proofing and storm shelters—while restricting credits to expenditures not funded by government entities and requiring compliance with current consensus-based standards. The effective date is for tax years beginning after December 31, 2025.
Finally, the act makes conforming amendments to the Internal Revenue Code to accommodate the new credits and sets up the “no double benefit” rule between the two credits.
The Five Things You Need to Know
The personal credit is 25% of qualified disaster mitigation expenditures with an annual per-taxpayer cap of $3,750 ($7,500 for joint returns).
A qualified dwelling unit can receive up to $15,000 in credits over all years for expenditures on that unit.
There is an income-based phaseout: the credit is reduced as AGI rises above $100,000, with inflation-adjusted adjustments starting in 2027.
A separate business credit (Sec. 45BB) also provides 25% of qualified expenditures, capped at $5,000 per year with its own phaseout based on average gross receipts.
No double benefit applies: credits under Sec. 25G and Sec. 45BB cannot be claimed for the same expenditure.
Section-by-Section Breakdown
Every bill we cover gets an analysis of its key sections.
Disaster mitigation expenditures (individual credit)
Section 25G(a) establishes an individual, nonrefundable credit equal to 25% of qualified disaster mitigation expenditures. The annual credit is capped at $3,750 for individuals or $7,500 for joint filers, and a cumulative per-dwelling unit cap of $15,000 applies across all years for that unit. Section 25G(b) introduces an income phaseout: the credit is reduced in proportion to the taxpayer’s AGI relative to thresholds, with inflation adjustments commencing after 2026 and rounding to the nearest $50. The phaseout is designed to taper benefits for higher-income households while preserving access for lower- and middle-income filers. “Qualified disaster mitigation expenditures” are defined in Section 25G(c) with an expansive list of eligible measures, from roof and wall strengthening to flood control and ignition-resistant construction, subject to location-based and regulatory constraints. ”},
Qualified disaster mitigation expenditures (definitions)
The bill defines a wide array of eligible expenditures designed to improve resilience against natural hazards. Items include reinforcing roof deck attachments, adding secondary water barriers, improving fire- and impact-resistant roofing, storm shelters, flood vents, stormwater drainage, and ignition-resistant exterior components. The definition also covers labor costs and inspection costs properly allocable to onsite preparation and installation, and requires compliance with consensus-based codes and standards (or more restrictive floodplain-management rules) for eligibility. Expenditures must address hazards identified in local mitigation plans and be located on a qualified dwelling unit within the United States or its territories. Expenditures funded by other government entities are excluded. ”},{
Limitations and compliance
Section 25G(d) imposes limitations tied to compliance with the latest consensus-based codes and standards. Onsite preparation, assembly, or installation must align with the most recent two editions of relevant standards, and the taxpayer must meet build-code requirements to qualify. Section 25G(e) clarifies that labor costs allocated to the mitigation work are includable in computing the credit, and Section 25G(f) requires inspection-related costs to be treated as part of the qualified expenditures. There is a general carryforward provision (Section 25G(g)) allowing unused credits to be carried forward for five years, subject to the annual tax-limit and existing credit carryover constraints. ”},{
Carryforward and documentation
Section 25G(g) provides for the carryforward of unused credits for five years, limited by the applicable tax limit for each year and coordinated with other credits. Section 25G(h) imposes documentation requirements, mandating adequate substantiation of expenditures and related information to the Secretary. The effective date for these provisions is for tax years beginning after December 31, 2025. ”},{
Business disaster mitigation credit
Section 45BB creates a parallel business credit, applying a 25% rate to qualified disaster mitigation expenditures at the taxpayer’s place of business with a $5,000 annual cap. A phaseout reduces this credit based on average gross receipts over the prior three years, and inflation adjustments apply after 2026. The credit is not available for expenditures offset by other government funding and is treated as a separate credit from the personal 25G credit, with a no-double-benefit rule. The section also requires alignment with Section 25G in defining qualified expenditures and governs similar eligibility standards for places of business.”},{
Conforming amendments
Section 38 is amended to add the disaster mitigation credit to the list of credits, ensuring the new Sec. 45BB credit is integrated into the overall tax credit framework. The table of sections is updated to include Sec. 25G (Disaster mitigation expenditures) and Sec. 45BB (Disaster mitigation credit). These conforming changes ensure consistency across personal and business tax credit calculations and the related interaction rules.
Effective date
The act specifies that the amendments apply to taxable years beginning after December 31, 2025, establishing a post-2025 start for both personal and business disaster mitigation credits and their associated conformity changes.
This bill is one of many.
Codify tracks hundreds of bills on Finance across all five countries.
Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Homeowners with qualifying dwellings in hazard-prone regions who invest in resilience measures and claim the personal credit (25G) to reduce tax liability.
- Owners of rental properties with qualifying dwellings who undertake mitigation upgrades and claim the personal credit.
- Construction contractors and installers specializing in hazard mitigation who perform eligible work and may benefit indirectly from increased demand for compliant, resilient upgrades.
- Small businesses with a qualifying place of business that invest in resilience measures and claim the business credit (45BB) to reduce tax liability.
Who Bears the Cost
- Taxpayers whose AGI triggers a reduced credit due to the Section 25G phaseout.
- Taxpayers whose expenditures do not qualify or who rely on non-eligible, government-funded mitigation work (which is excluded).
- The federal treasury bears reduced tax revenue as credits are claimed, particularly if uptake is high in disaster-prone regions.
- Businesses or households that might implement mitigation measures not eligible under the hazard-plan constraints, potentially limiting benefits for certain projects.
Key Issues
The Core Tension
The core tension is between encouraging broad resilience investments and limiting fiscal exposure through income-based phaseouts, spend caps, and eligibility constraints that may exclude meaningful mitigation on the margins. The policy must balance accessibility for lower-income homeowners with the risk of elevated cost to the Treasury and possible administrative burden.
The bill creates a robust set of requirements and exclusions that may create administrative complexity for taxpayers and the IRS. Eligibility hinges on adherence to consensus-based codes and standards and on the expenditure being related to a defined set of mitigation measures.
The hazard-specific applicability and regional plan constraints mean not every disaster-related expenditure qualifies, particularly in areas lacking the relevant mitigation plans or declarations. The interaction between the personal and business credits (and the no-double-benefit rule) is designed to prevent double-dipping but adds a layer of coordination for multi-location owners and for those with investments spanning residential and commercial properties.
The phaseouts reduce value for higher-income taxpayers, which may limit the program’s reach in wealthier communities that also experience disproportionate disaster risk. Finally, the reliance on future inflation adjustments introduces uncertainty about the real value of credits in later years.
Try it yourself.
Ask a question in plain English, or pick a topic below. Results in seconds.