The proposed bill establishes the "Catastrophe Savings Accounts Act" as a new chapter in Title 44 of the General Laws concerning taxation. This act allows resident taxpayers to establish a catastrophe savings account specifically for covering qualified expenses related to catastrophic events, such as natural disasters declared by the governor.

The bill defines key terms, including "catastrophe savings account," which refers to a regular savings or money market account established to pay for qualified catastrophe expenses; "catastrophic event," which includes various weather-related disasters; and "qualified catastrophe expenses," which encompass deductibles and repair costs not covered by homeowner's insurance.

Taxpayers may contribute to their catastrophe savings accounts based on their insurance deductibles: up to $2,000 if the deductible is $1,000 or less, or the lesser of twice the deductible or $25,000 if it exceeds $1,000. Self-insured taxpayers may contribute up to $250,000, provided it does not exceed the fair market value of their primary residence.

The bill allows individual taxpayers to deduct contributions made to these accounts from their taxable income and exempts interest income earned from taxation. Distributions from the account will be included in the taxpayer's income unless used for qualified expenses, with specific provisions for excess contributions and the treatment of accounts upon the taxpayer's death.

The act is set to take effect on July 1, 2026, and will apply to taxable years beginning on or after January 1, 2027.