# Emergency Savings Accounts Act of 2021

This bill creates a new type of savings account that lets people set aside money tax-free to prepare for and recover from disasters and emergencies. Think of it as a specialized emergency fund with tax benefits.

Here's how it works: If you open an Emergency Savings Account, you can contribute up to $5,000 per year and deduct that amount from your taxes—meaning you don't pay income tax on the money you put in. The money grows tax-free inside the account. When you withdraw it to pay for qualifying expenses, you don't owe taxes on those withdrawals either. This is similar to how Health Savings Accounts work, but focused on disaster and emergency preparedness instead of medical costs.

The bill covers four main categories of expenses. First, it covers disaster prevention—things like installing tornado safe rooms, reinforced roofs, flood-resistant materials, or backup generators to protect your home from earthquakes, hurricanes, wildfires, and other natural disasters. Second, it covers disaster recovery expenses if you suffer uninsured losses of $1,000 or more from a federally declared disaster. Third, during a public health emergency (like a pandemic), if you're unemployed or had your hours cut, you can use the money for childcare, health insurance premiums, housing costs like rent or mortgage, and utilities. Fourth, if you experience any unemployment during the year, you can withdraw up to $500 for any expenses without restriction.

If you withdraw money for something other than these approved purposes, you'll owe income tax on that withdrawal plus an extra 20 percent penalty—though this penalty doesn't apply if you're disabled or the money goes to your heirs after you die. The account limits adjust annually for inflation starting in 2022. Anyone who lives in the United States can open one of these accounts, though dependents claimed on someone else's tax return cannot use this deduction.

Emergency Savings Accounts Act of 2021

Cloud, Michael

Emergency Savings Accounts Act of 2021 This bill allows an individual taxpayer occupying a residence a deduction from gross income for up to $5,000 of amounts paid into such taxpayer's emergency savings account. The bill defines emergency savings account as an account established exclusively to pay the qualified disaster and public health emergency expenses of the account beneficiary. The bill defines qualified disaster and public health emergency expenses as disaster mitigation expenses, disaster recovery expenses, public health emergency expenses, and unemployment-related expenses.