Iowa 2025-2026 Regular Session

Iowa House Bill HF988

Introduced
4/7/25  
Engrossed
4/22/25  

Caption

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

Impact

In terms of state law, HF988 introduces significant tax incentives for those who utilize these accounts. Notably, contributions made to the accounts will be tax-deductible up to certain limits based on the annual insurance premium paid by the account holder. Furthermore, any interest accrued in these accounts is tax-exempt. This financial structure aims to encourage residents to save for unexpected costs incurred from natural disasters, thereby increasing their financial resilience. The bill also stipulates that funds withdrawn for purposes other than qualified expenses will incur penalties, thereby promoting strict use of the funds as intended.

Summary

House File 988 establishes a new type of savings account known as a catastrophic savings account designed to assist individuals in covering the costs associated with deductible payments on property and casualty insurance policies. The act permits residents to open these interest-bearing accounts starting January 1, 2026, either individually or jointly with a spouse. To qualify, account holders must meet specific criteria, including submitting designated forms to the Department of Revenue. The intention behind this legislation is to alleviate the financial burden incurred by homeowners during catastrophic events, as defined in the bill, like floods or severe storms, which may lead to significant deductible payments.

Contention

Despite its benefits, HF988 has faced criticism regarding the restrictions placed on the use of these savings accounts. For instance, if an account holder withdraws funds for nonqualified expenses, these amounts must be added to their taxable income, alongside a 2.5% penalty on the excess withdrawal. Critics argue that such penalties could deter individuals from utilizing the accounts effectively and may add bureaucratic complexity for both taxpayers and financial institutions. Additionally, concerns arise from the requirement for account holders to maintain rigorous reporting obligations concerning their income and transaction records, potentially impacting those individuals who may not have the necessary resources or understanding to comply.

Final_notes

In summary, HF988 aims to establish financial measures that support homeowners in managing the costs associated with catastrophic events, providing both tax relief and a structured saving environment. However, the implications of its financial stipulations and potential burdens on account holders remain points of discussion among lawmakers and stakeholders.

Companion Bills

IA HF622

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 HSB 149; See HF 988.)

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.)

Previously Filed As

IA HF2638

A bill for an act excluding nonqualified deferred compensation income from the individual income tax, and including retroactive applicability provisions.(Formerly HF 2105.)

IA HF2537

A bill for an act relating to the treasurer of state's duties, including Iowa educational savings plan trust and Iowa ABLE savings plan trust requirements and disposition of unclaimed property, and including retroactive applicability provisions.(Formerly HSB 626; See HF 2667.)

IA HF715

A bill for an act relating to state and local finance and the administration of the tax and related laws by the department of revenue, and including effective date, applicability, and retroactive applicability provisions.(Formerly HSB 187.)

IA HF2160

A bill for an act excluding from the individual income tax certain direct trustee-to-trustee transfers from educational savings plan trust accounts to Roth individual retirement accounts, and including retroactive applicability provisions.

IA HF2667

A bill for an act relating to the treasurer of state's duties, including Iowa educational savings plan trust and Iowa ABLE savings plan trust requirements and disposition of unclaimed property, and including retroactive applicability provisions. (Formerly HF 2537, HSB 626.) Effective date: 07/01/2024. Applicability date: 01/01/2024.

IA SF552

A bill for an act relating to individual and corporate income taxes, the insurance premium tax, and including the contingent repeal of the individual income tax, and including retroactive applicability and effective date provisions.(Formerly SSB 1126.)

IA HF659

A bill for an act modifying the computation of net income for the individual income tax related to the capital gain or loss from the sale of bullion, coins, and currency, and including applicability provisions.(Formerly HF 208; See HF 2626.)

IA SF2398

A bill for an act relating to state taxation by modifying alternate and individual income tax rates, and including effective date and retroactive applicability provisions.(Formerly SSB 3038.)

IA HF2666

A bill for an act relating to the farm tenancy net income exclusion available against the individual income tax, and including effective date and retroactive applicability provisions.(Formerly HF 2503.)

IA HF2679

A bill for an act providing a deduction from the individual and corporate income taxes for the amount of certain income derived from indigent representation by an eligible law firm, and including retroactive applicability provisions. (Formerly HF 2504.)

Similar Bills

IA HF622

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.)

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.)

MS HB888

Insurance mitigation; revise various provisions related to.

LA HB126

Authorizes individual income tax deductions for contributions to catastrophe savings accounts (OR DECREASE GF RV See Note)

LA HB382

Authorizes establishment of tax-advantaged catastrophe savings accounts to cover losses from damage to taxpayers' primary residences and commercial property (OR DECREASE GF RV See Note)

AL HB106

Relating to Catastrophe Savings Accounts; expands allowable expenses

AL SB73

Relating to Catastrophe Savings Accounts; expands allowable expenses

MS SB2782

The Mississippi Comprehensive Hurricane And Wind Damage Mitigation Program; create and set provisions related thereto.