Florida Lawmakers Propose Changing Tax Code To Give Homeowners Insurance Premium Relief

Florida Congressman Byron Donalds is teaming up with his colleague Sen. Rick Scott on a bill to provide Florida homeowners a measure of relief from the Sunshine State's insurance crisis. The bill, known as "The Flood Insurance Relief Act," would change the Internal Revenue Code of 1986 by giving homeowners what's known as an "above the line" deduction for their insurance premiums.

An "above the line" deduction would allow homeowners to deduct the cost of their insurance premiums from their gross income instead of their take-home pay, a move that would result in significant savings. In a news release explaining the motivation behind the bill, Rep. Donalds and Sen. Scott contend that it would provide ‘much-needed tax relief for National Flood Insurance Program (NFIP) and private insurance policyholders across Southwest Florida, the Sunshine State, and the nation.'

It has the potential to be an important piece of legislation because Florida's home insurance crisis is rapidly spreading beyond its borders and becoming a national issue. With that said, the situation in Florida is particularly dire. Florida's insurance industry has been battered by a series of rapid-fire hurricanes and extreme weather events that struck the state at the same time property values were spiking due to a massive influx of new residents.

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Those storms, which came in quick succession between 2018 and 2023, cost insurers billions of dollars in claims payouts and claims-related litigation. It not only forced insurers to dramatically raise premiums, but it also disrupted the reinsurance market to such an extent that many insurers packed up and left the market entirely. As it stands, Florida's state government-run insurance company, Citizens Property Insurance, is the single largest home insurance policy provider in Florida.

The idea of a state-run insurer being on the hook for the bill after a major hurricane is problematic for obvious reasons when one considers the total value of privately held property in Florida and the fact that there is no state income tax. Another issue for Florida's homeowners is that the state's remaining private insurers are making ever-increasing demands in terms of premiums, deductibles, and coverage limits on policy renewals.

Florida residents already pay the highest average insurance premiums in the nation and many policy renewals have one thing in common: they cost more and cover less. This has become a particularly thorny issue for Florida's condominium market, a lucrative sector popular with the state's retirees. Many of them are getting squeezed on both sides, as the only thing rising faster than their individual homeowner's premium is the group policy on the entire community.

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Insurers are also inspecting condominium communities and demanding that upgrades and repairs be made before renewing policies. In many cases, these repairs are very expensive and result in hefty assessments that property owners on fixed incomes simply can't afford. Consequently, many condominium owners are putting their properties on the market, only to find buyers very hesitant about purchasing due to concerns about secondary expenses such as insurance premiums and HOA assessments.

It's also important to note that Florida is far from the only state dealing with an insurance crisis. Home insurers have been heading for the exit door in California due to the cost of covering floods, fires, and other natural disasters. Like Florida, California's state-run insurance company, which was supposed to be a carrier of last resort, is quickly becoming a first option for frustrated homeowners who can't find affordable policies elsewhere.

States like Louisiana, West Virginia, and South Dakota are all reporting average premium increases of over 200%. With that as a backdrop, "The Flood Insurance Relief Act" could be a big help to struggling homeowners nationwide. Being able to write insurance premiums off against gross income wouldn't solve the problem entirely, but it would certainly soften the blow many American homeowners are receiving when their policies come up for renewal.

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