Catastrophe Savings Accounts

How it works

Catastrophe savings accounts are interest-bearing accounts that South Carolina residents can establish at a state or federally chartered bank. The Department of Insurance says they are designed to help residents prepare for the financial impact of a catastrophic storm while saving on South Carolina income taxes.

What the money covers

The department says withdrawals can be used for qualified catastrophe expenses after a hurricane, flood, or windstorm event declared an emergency by the Governor. The brochure says qualified catastrophe expenses include insurance deductibles and other uninsured losses from hurricane, rising floodwaters, or other catastrophic windstorm damage.

Tax treatment

Money contributed to the account and annual interest earnings are not subject to South Carolina income tax if left in the account or used for qualified catastrophe expenses. Withdrawals for other purposes are treated as ordinary income and are subject to a 2.5% additional tax unless an exception applies.

Account setup and limits

The account must be labeled as a catastrophe savings account and kept separate from other accounts. The brochure says contribution limits depend on the homeowner’s insurance deductible: up to $2,000 if the deductible is $1,000 or less; the lesser of $15,000 or twice the deductible if the deductible is more than $1,000; and up to $250,000 for self-insured homeowners, not exceeding the value of the home.

Timing and deadlines

This is an ongoing state tax feature, not a grant program. The official page does not list an application window.