Alabama § 40-18-311 - Income Tax Deduction; Contributions to Catastrophe Savings Account.

§ 40-18-311. Income Tax Deduction; Contributions to Catastrophe Savings Account.

(a) An individual taxpayer is allowed a deduction against income earned for state income tax purposes imposed pursuant to Section 40-18-5 for amounts contributed to a catastrophe savings account in accordance with subsection (c), and all interest income earned by a catastrophe savings account is exempt from the tax imposed pursuant to Section 40-18-5.

(b) A catastrophe savings account is not subject to attachment, levy, garnishment, or legal process in this state.

(c) The total amount that may be contributed to a catastrophe savings account must not exceed any of the following:

(1) In the case of an individual whose qualified deductible is less than or equal to one thousand dollars ($1,000), two thousand dollars ($2,000), plus amounts to cover other qualified catastrophe expenses not to exceed fifteen thousand dollars ($15,000).

(2) In the case of an individual whose qualified deductible is greater than one thousand dollars ($1,000), the amount equal to the lesser of fifteen thousand dollars ($15,000) or twice the amount of the taxpayer’s qualified deductible, plus amounts to cover other qualified catastrophe expenses not to exceed fifteen thousand dollars ($15,000).

(3) In the case of a self-insured individual who chooses not to obtain insurance on his or her residential property, two hundred fifty thousand dollars ($250,000), but in no event may the amount contributed exceed the value of the individual taxpayer’s residential property.

(d) If a taxpayer contributes in excess of the limits provided in subsection (c), the taxpayer shall withdraw the amount of the excess contributions and include that amount in Alabama income for purposes of Section 40-18-5 in the year of withdrawal.