What are qualified catastrophe expenses?
Qualified catastrophe expenses are expenses paid or incurred by reason of a major disaster that has been declared by the Governor to be an emergency by Executive Order. These expenses include payment of insurance deductibles and other uninsured risks of loss from hurricane, rising floodwaters or other catastrophic windstorm event damage. Example 1. Tom has a $1,000 insurance deductible. Tom established a Catastrophe Savings Account. Hurricane Devon made landfall in South Carolina and the Governor declared a State of Emergency. Tom can withdraw money from his Catastrophe Savings Account to pay for the $1,000 insurance deductible. The $1,000 withdrawal will not be included in his South Carolina taxable income for that year. • What are the requirements of a Catastrophe Savings Account? The account must be labeled as “Catastrophe Savings Account.” A taxpayer can establish only one Catastrophe Savings Account and must specify that the purpose of the account is to cover insurance deductibles
