Alabama residents may deduct deposits made to a Catastrophe Savings Account from their gross income. The deduction amount depends on the insurance deductible associated with the account:
Deduction Amounts
- $2,000 deduction if the insurance deductible is $1,000 or less.
- Lesser of $15,000 or twice the insurance deductible if the deductible exceeds $1,000.
Additional Notes
- The Catastrophe Savings Account program is available to eligible Alabama taxpayers who establish a qualified account meeting Alabama statutory requirements. Eligibility is tied to maintaining qualifying insurance coverage or deductible thresholds as defined under Alabama law and program rules.
- Nonqualified withdrawals from a Catastrophe Savings Account are included in Alabama taxable income. The taxable amount is the portion of the withdrawal that exceeds qualified catastrophe-related expenses during the tax year. These amounts are reported as “Other Income” on Form 40, Part II, in the line designated for other income items in the applicable tax year instructions.
Source:
Form 40, Alabama Department of Revenue
Disclaimer: Always verify details with the official Federal or State Department of Revenue Forms and Instructions. This information is for general guidance and may not apply to all individual circumstances. For complex tax situations, consult a CPA or tax attorney.