The bill establishes a Catastrophic Savings Account (CSA) program in Iowa, allowing residents to open interest-bearing savings accounts specifically for covering qualified catastrophic expenses, such as homeowners' insurance deductibles related to catastrophic events. The bill outlines the process for account establishment, which includes designating a beneficiary and submitting necessary forms to the Department of Revenue by April 30 of the year following the account's opening. Contributions to the account can be made by any person, with specific lifetime contribution limits based on the account holder's homeowners insurance premium. The bill also mandates that account holders submit annual reports and transaction reports to the Department of Revenue.

In terms of tax implications, the bill allows account holders to deduct contributions to their CSA from their individual income tax, with limits based on their homeowners insurance premiums. Additionally, any interest earned on the account is exempt from state income tax. However, if funds are withdrawn for non-qualified expenses, those amounts must be added to the account holder's taxable income and are subject to a penalty. The bill also specifies that upon the death of the account holder, the funds in the account will be taxable to the recipient, unless it is the surviving spouse. The provisions of the bill will take effect for tax years beginning on or after January 1, 2026.

Statutes affected:
Introduced: 422.7