READY Accounts Act
2/12/2025, 2:53 AM
Status of Legislation
Purpose and Summary
READY Accounts Act
This bill establishes a new Residential Emergency Asset-accumulation Deferred Taxation Yield (READY) account, allows individuals to make tax-deductible contributions of up to $4,500 per year to such accounts (adjusted annually for inflation), and allows individuals to take tax-free distributions from such accounts to pay for qualified home disaster mitigation and recovery expenses related to a principal residence owned by the taxpayer.
Under the bill, qualified home disaster mitigation expenses include expenses certified by a qualified industry professional as meeting criteria to mitigate damage from a natural or other disaster, including
- installing a roofing underlayment to sheathing, impact-resistant windows, impact-resistant entry doors, or ground anchors;
- replacing a roof covering;
- applying a foam adhesive to reinforce the roof structure;
- strengthening the connection of the roof deck to roof framing, roof-to-wall connections, soffits, or attic ventilation openings;
- elevating a residence; or
- achieving the current building code standard.
Qualified home disaster recovery expenses include costs for repairing damage to a residence resulting from fire, storm, or other casualty (provided such costs are not reimbursed).
Distributions from a READY account used for anything other than qualified home disaster mitigation and recovery expenses must be included in gross income and are subject to a 20% penalty. (Some exceptions apply.)
Finally, the bill imposes a 6% tax on contributions in excess of the annual limit. (Some exceptions apply.)
Under this bill, individuals can contribute up to $5,000 per year to a READY account, and the interest earned on these contributions will not be taxed until the funds are withdrawn. This tax-deferred status is intended to incentivize individuals to save for emergencies and build up their financial resilience.
The READY Act also includes provisions to ensure that funds withdrawn from these accounts are used for qualified emergency expenses, such as medical bills, home repairs, or job loss. Any funds withdrawn for non-qualified expenses will be subject to taxation and a penalty. Overall, the READY Act aims to encourage individuals to save for emergencies and build up their financial security by providing a tax-advantaged savings vehicle. This bill has the potential to help individuals better prepare for unexpected financial challenges and reduce their reliance on high-interest debt in times of crisis.
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Recent Activity
READY Accounts Act
This bill establishes a new Residential Emergency Asset-accumulation Deferred Taxation Yield (READY) account, allows individuals to make tax-deductible contributions of up to $4,500 per year to such accoun...
Under the bill, qualified home disaster mitigation expenses include expenses certified by a qualified industry professional as meeting criteria to mitigate damage from a natural or other disaster, including
- installing a roofing underlayment to sheathing, impact-resistant windows, impact-resistant entry doors, or ground anchors;
- replacing a roof covering;
- applying a foam adhesive to reinforce the roof structure;
- strengthening the connection of the roof deck to roof framing, roof-to-wall connections, soffits, or attic ventilation openings;
- elevating a residence; or
- achieving the current building code standard.
Qualified home disaster recovery expenses include costs for repairing damage to a residence resulting from fire, storm, or other casualty (provided such costs are not reimbursed).
Distributions from a READY account used for anything other than qualified home disaster mitigation and recovery expenses must be included in gross income and are subject to a 20% penalty. (Some exceptions apply.)
Finally, the bill imposes a 6% tax on contributions in excess of the annual limit. (Some exceptions apply.)