The READY Accounts Act proposes to amend the Internal Revenue Code of 1986 by establishing Residential Emergency Asset-accumulation Deferred Taxation Yield (READY) accounts. These accounts are designed to provide a tax-advantaged savings mechanism for individuals to prepare for and recover from home-related natural disasters. The primary goal is to encourage homeowners to invest in disaster mitigation and recovery efforts.

Individuals would be allowed to deduct cash contributions made to their READY accounts, with an annual limit of $4,500. This dollar amount is subject to inflation adjustments for taxable years beginning after 2026. Contributions must be in cash, and the account must be held by a qualified trustee, such as a bank, with assets not invested in life insurance contracts.

Funds from a READY account can be used for qualified home disaster mitigation and recovery expenses. Qualified disaster mitigation measures include specific actions like installing roofing underlayment, strengthening roof connections, installing impact-resistant windows or doors, elevating a home, or achieving current building code standards. These measures must meet criteria set by the Secretary of the Treasury in consultation with FEMA and be certified by a qualified industry professional.

Qualified disaster recovery costs cover expenses for repairing damage to a qualified home resulting from fire, storm, or other casualty, provided these costs are not compensated by insurance or other means. A qualified home is defined as a structure owned and used by the taxpayer as their principal residence. The bill aims to ensure that funds are directed towards genuine disaster preparedness and recovery needs.

READY accounts themselves are generally exempt from taxation, similar to other tax-advantaged savings vehicles. Distributions used exclusively for qualified home disaster mitigation and recovery expenses are not includible in gross income. However, amounts distributed for non-qualified expenses are included in gross income and are subject to an additional 20 percent tax penalty, encouraging responsible use of the funds.

The bill also includes provisions for handling excess contributions, allowing them to be returned before the tax return due date without penalty if accompanied by attributable net income. Rules for rollover contributions, transfers incident to divorce, and the treatment of accounts upon the death of the beneficiary are also outlined. These measures ensure the accounts operate within a structured regulatory framework, similar to other tax-deferred savings accounts.