How do I report contributions to a Catastrophe Savings Account on my South Carolina income tax return?
One benefit of a Catastrophe Savings Account is that the amount placed in the account reduces the taxpayer’s South Carolina taxable income and, as a consequence, reduces the South Carolina income tax that has to be paid. The amount contributed to the Catastrophe Savings Account should be included with “Other Subtractions” in Part 2 – Subtractions from Federal Taxable Income on the SC 1040 form. Example 5. Tom established a Catastrophe Savings Account and deposited $6,000. Tom’s federal taxable income is $40,000 and this amount is reported on his South Carolina Form SC 1040, Line 1. Tom’s $6,000 contribution will be subtracted under “Other Subtractions” in Part 2 – Subtractions from Federal Taxable Income. His South Carolina taxable income is reduced from $40,000 to $34,000 based on the contribution. This is only a deduction for South Carolina income tax purposes; it is not a deduction for federal income tax purposes. • How much will I save on state income taxes? The amount of reduction
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