The Alabama Tax section is used to report additional taxes that are not automatically calculated as part of your regular Alabama income tax. One of these taxes is the Catastrophe Savings Tax.
Pathway to this entry is:
Alabama State Return > Tax > Catastrophe Savings Tax
What Is a Catastrophe Savings Account?
Alabama allows eligible taxpayers to establish a Catastrophe Savings Account to set aside money for qualified catastrophe-related expenses on a qualifying residence.
These accounts are intended to help homeowners pay for expenses related to events such as:
- Hurricanes
- Windstorms
- Floods
- Other qualifying catastrophic events
Qualified deposits may be deductible on the Alabama return when made to the account.
Why Would I Owe Catastrophe Savings Tax?
The Catastrophe Savings Tax generally applies when funds from a Catastrophe Savings Account were:
- Withdrawn for nonqualified purposes.
- Used for expenses that do not qualify under Alabama law.
- Distributed in a manner that makes the funds taxable.
When this occurs, all or part of the previously deducted amount may become subject to Alabama tax.
What Amount Should I Enter?
Enter the amount of Catastrophe Savings Tax due for the tax year.
If no Catastrophe Savings Tax is due, enter 0.
The amount entered should be based on your Catastrophe Savings Account records and any taxable distributions made during the year.
What Documentation Should I Keep?
Keep copies of:
- Catastrophe Savings Account statements.
- Deposit records.
- Withdrawal records.
- Receipts for qualified catastrophe expenses.
- Any documentation showing how account funds were used.
These records should be retained with your tax records in case Alabama requests verification.
How Does This Affect My Return?
The Catastrophe Savings Tax may:
- Increase Alabama tax liability.
- Reduce an Alabama refund.
- Increase the balance due with the return.
The impact depends on the amount of tax entered.
Important Information
- Enter only the amount of Catastrophe Savings Tax due for the tax year.
- If no Catastrophe Savings Tax is due, enter 0.
- Withdrawals used for qualified catastrophe expenses may not be subject to this tax.
- Nonqualified withdrawals may result in additional tax.
- Keep records supporting all deposits and withdrawals from the account.
Additional Information
If you made withdrawals from an Alabama Catastrophe Savings Account during the year, review your account records carefully to determine whether any portion of the distribution is subject to Alabama Catastrophe Savings Tax.