Flood Insurance Tax Credit Act of 2025 in plain language
Sec. 1: Short title
This section would let the Act be cited as the "Flood Insurance Tax Credit Act of 2025." It has no other effect.
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1. Short title This Act may be cited as the Flood Insurance Tax Credit Act of 2025 .
Sec. 2: Credit for flood insurance expenses
This section would add a new provision, section 25G, to the Internal Revenue Code of 1986, creating a tax credit for flood insurance premiums. The credit for a taxable year would equal the sum of three separately capped amounts. First, the smaller of the taxpayer's Federal flood insurance expenses for the year or $1,500. Second, the smaller of 50 percent of the taxpayer's private flood insurance expenses for the year or $3,000. Third, the smaller of the taxpayer's Federal contents coverage flood insurance expenses for the year or $600. Each of these three amounts would then be reduced, but never below zero, based on the taxpayer's income for the year. The Federal flood insurance amount would be reduced by 1.5 percent of income above $100,000 for a joint return, or 3 percent of income above $50,000 for any other return. The private flood insurance amount would be reduced by 3 percent of income above $100,000 for a joint return, or 6 percent of income above $50,000 for any other return. The Federal contents coverage amount would be reduced by 0.6 percent of income above $100,000 for a joint return, or 1.2 percent of income above $50,000 for any other return. The section defines three types of expense. "Federal flood insurance expense" means premiums paid for coverage made available under the National Flood Insurance Act of 1968, minus the portion of those premiums that pays for contents coverage. "Private flood insurance expense" means premiums paid for flood insurance coverage other than coverage made available under the National Flood Insurance Act of 1968, including private coverage for the contents of a structure. "Federal contents coverage flood insurance expense" means premiums paid under the National Flood Insurance Act of 1968 specifically for coverage of the contents of a structure. Only expenses for coverage tied to the taxpayer's principal residence, as that term is used in tax code section 121, would count toward the credit. The credit would not be allowed for any amount that is also deductible under subsection (c) or (e) of section 280A of the tax code. For taxable years beginning after 2026, the dollar amounts used in computing the credit and its phaseout ($1,500, $3,000, $600, $100,000, and $50,000) would be increased each year by a cost-of-living adjustment computed under tax code section 1(f)(3), using 2025 in place of 2016 as the base year; if the adjusted amount is not a multiple of $50, it would be rounded down to the next lowest multiple of $50. This section would also add the new credit to the tax code's table of sections, listing it as "Sec. 25G. Flood insurance expenses," a non-substantive update so the table matches the new provision. The changes made by this section would apply to taxable years beginning after December 31, 2025.
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2. Credit for flood insurance expenses (a) In general Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 25F the following new section: 25G. Flood insurance expenses (a) Allowance of credit There shall be allowed as a credit against the tax imposed by this subtitle for a taxpayer for a taxable year an amount equal to the sum of— (1) the lesser of— (A) the Federal flood insurance expenses of the taxpayer for the taxable year, and (B) $1,500, plus (2) the lesser of— (A) 50 percent of the private flood insurance expenses of the taxpayer for the taxable year, and (B) $3,000, plus (3) the lesser of— (A) Federal contents coverage flood insurance expenses of the taxpayer for the taxable year, and (B) $600. (b) Phaseout (1) Federal flood insurance expense The amount determined under subsection (a)(1) for a taxpayer for a taxable year shall be reduced (but not below zero) by— (A) in the case of a joint return, 1.5 percent of so much of the taxpayer’s income for such taxable year as exceeds $100,000, and (B) in any other case, 3 percent of so much of the taxpayer’s income for such taxable year as exceeds $50,000. (2) Private flood insurance expense The amount determined under subsection (a)(2) for a taxpayer for a taxable year shall be reduced (but not below zero) by— (A) in the case of a joint return, 3 percent of so much of the taxpayer’s income for such taxable year as exceeds $100,000, and (B) in any other case, 6 percent of so much of the taxpayer’s income for such taxable year as exceeds $50,000. (3) Federal contents coverage flood insurance expense The amount determined under subsection (a)(3) for a taxpayer for a taxable year shall be reduced (but not below zero) by— (A) in the case of a joint return, 0.6 percent of so much of the taxpayer’s income for such taxable year as exceeds $100,000, and (B) in any other case, 1.2 percent of so much of the taxpayer’s income for such taxable year as exceeds $50,000. (c) Definition For purposes of this section: (1) Federal flood insurance expense The term Federal flood insurance expense means the excess of— (A) amounts paid or incurred as premiums for flood insurance coverage made available under the National Flood Insurance Act of 1968, over (B) Federal contents coverage flood insurance expense. (2) Private flood insurance expense The term private flood insurance expense means amounts paid or incurred as premiums for flood insurance coverage other than flood insurance coverage made available under the National Flood Insurance Act of 1968, including such coverage for the contents of a structure. (3) Federal contents coverage flood insurance expense The term Federal contents coverage flood insurance expense means amounts paid or incurred as premiums for flood insurance coverage made available under the National Flood Insurance Act of 1968 for contents of a structure. (d) Primary residence Federal flood insurance expenses, private flood insurance expenses, and Federal contents coverage flood insurance expenses shall only be taken into account to the extent that such expenses are paid or incurred for coverage related to the taxpayer’s principal residence (as such term is used in section 121). (e) Denial of double benefit No credit shall be allowed under subsection (a) for any amount with respect to which a deduction is allowed due to subsection (c) or (e) of section 280A. (f) Inflation adjustment In the case of any taxable year beginning in calendar years after 2026, each of the dollar amounts in subsections (a) and (b) shall be increased by an amount equal to— (1) such dollar amount, multiplied by (2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 2025 for 2016 in subparagraph (A)(ii) thereof. If any amount after adjustment under the preceding sentence is not a multiple of $50, such amount shall be rounded to the next lowest multiple of $50. . (b) Clerical amendment The table of sections for subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to section 25F the following new item: Sec. 25G. Flood insurance expenses. . (c) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2025.