The Shelter Act creates two new tax credits to help people and businesses pay for improvements that protect their homes and workplaces from natural disasters like floods, hurricanes, wildfires, and earthquakes. Starting in 2026, homeowners can claim a credit worth 25% of what they spend on disaster-proofing their homes, up to $3,750 per year (or $7,500 if filing jointly), with a lifetime limit of $15,000 per home. Eligible improvements include reinforcing roofs, installing storm shutters, elevating homes above flood levels, adding fire-resistant materials, creating firebreaks around the property, installing backup generators, and building safe rooms. Small business owners can claim a similar credit worth 25% of their disaster mitigation spending at their workplace, capped at $5,000 per year.

To qualify for these credits, your home or business must be located in an area that has experienced a federally declared disaster in the past five years, or in a nearby area, or in a designated disaster resilience zone. The credits phase out for higher-income individuals—if your income exceeds $100,000, the credit starts to reduce. For businesses, the credit phases out once average gross receipts exceed $5 million. You cannot claim the credit for improvements that are already being paid for by government grants or other public funding. The credits can be carried forward if you don't have enough tax liability to use them all in one year, allowing you to apply unused credits over the next five years. Starting in 2027, the dollar limits will increase slightly each year to account for inflation.