This 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, including the requirement for account holders to submit designation 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.

Additionally, the bill introduces tax incentives for CSA account holders, allowing them to deduct contributions from their individual income tax up to specified limits and exempting interest earned on the accounts from taxation. The contribution limits vary based on the account holder's insurance premium, with a maximum of $2,000 for those with premiums under $1,000, and up to $350,000 for self-insured individuals. The bill also includes provisions for taxation upon withdrawal of funds for nonqualified expenses, penalties for such withdrawals, and stipulations regarding the tax implications upon the account holder's death or the sale of their homestead. The tax provisions will take effect for tax years beginning on or after January 1, 2026.

Statutes affected:
Introduced: 422.7