Iowa 2025-2026 Regular Session

Iowa House Bill HF622

Introduced

2/27/25

Refer

2/27/25

Caption

A bill for an act creating a catastrophic savings account and modifying individual income taxes for account holders and including applicability provisions.(Formerly HSB 149; See HF 988.)

Impact

The bill also modifies state income tax laws, allowing account holders to deduct contributions made to their catastrophic savings accounts from their taxable income. Additionally, interest accrued in these accounts will be exempt from state income tax. The legislation stipulates various contribution limits based on homeowners' insurance premiums, which varies depending on the coverage and circumstances of the individual account holder. However, nonqualified withdrawals will incur a penalty, fostering a responsible approach towards the intended use of the funds.

Summary

House File 622 introduces a new financial tool in the form of a catastrophic savings account, aimed at helping individuals manage the costs associated with catastrophic events such as natural disasters. This savings account allows residents to save funds specifically for qualified catastrophic expenses, which includes paying deductibles for homeowners' insurance policies covering such events. With the permission to open these interest-bearing accounts from state or federally chartered institutions, the bill seeks to bolster residents' financial preparedness for emergencies while providing them with beneficial tax incentives.

Contention

While sponsors of the bill argue that these measures will enhance fiscal responsibility and protect citizens from the financial fallout of catastrophic events, there could be concerns regarding the implications for low-income families or those without proper insurance coverage. Specifically, the strict guidelines about qualifying expenses and penalties for nonqualified withdrawals might pose barriers for some individuals. Moreover, the requirement for detailed reporting may create additional administrative burdens for both the account holders and the financial institutions managing these accounts.

Companion Bills

IA HSB149

Related A bill for an act creating a catastrophic savings account and modifying individual income taxes for account holders and including applicability provisions.(See HF 622, HF 988.)

IA HF988

Similar To A bill for an act creating a catastrophic savings account and modifying individual income taxes for account holders and including applicability provisions.(Formerly HF 622, HSB 149.)

Previously Filed As

IA HF988

A bill for an act creating a catastrophic savings account and modifying individual income taxes for account holders and including applicability provisions.(Formerly HF 622, HSB 149.)

IA HSB149

A bill for an act creating a catastrophic savings account and modifying individual income taxes for account holders and including applicability provisions.(See HF 622, HF 988.)