AL HB456

Establishes catastrophe savings accounts as regular savings or money market accounts for Alabama residents to cover insurance deductibles and uninsured losses from hurricanes, windstorms, tornadoes, hail, and similar events on their legal residence.

Allows individual taxpayers a state income tax deduction for contributions to catastrophe savings accounts and exempts all interest income earned by these accounts from Alabama income tax.

Sets contribution limits based on insurance deductible amounts: up to $2,000 for deductibles of $1,000 or less; up to $15,000 or twice the deductible amount for deductibles exceeding $1,000; and up to $250,000 for self-insured individuals, but not exceeding the home's value.

Requires distributions from the account to be included in taxable income unless used for qualified catastrophe expenses, with a 2.5% additional tax penalty on taxable distributions; no penalty applies after age 70 for self-insured accounts or if the taxpayer no longer owns a qualifying residence.

Protects catastrophe savings accounts from attachment, levy, garnishment, or legal process; accounts pass to surviving spouses tax-free upon death, then to heirs with income inclusion.