First Time Home Buyer Savings Accounts in Idaho:
During the 2020 legislative session a new tax-deductible savings tool, H589, was created to provide first time home buyers the ability to establish savings accounts for down payments and closing costs associated with their first home purchase. H589 allows individuals to save up to $15,000 per year and up to $100,000 total, or married couples $30,000 per year up to $100,000 total; all of which can be Idaho income tax deductible. The account mirrors pre-existing law that allows for tax deductible savings for Education and Health Savings accounts and works identically in the following way:
• An individual or couple goes to a participating financial institution and asks to open a First Time Home Buyer Savings Account.
• If the institution is set up for these accounts, they will be able to deposit funds during the life of the account and at the end of each year, deduct the deposited amount (up to the caps) from their gross income for state income tax calculations.
• If the funds are used for the down payment or closing costs of a first-time home purchase, they are valid.
• If the funds end up being used for any other purpose, the regular tax that would have been due under the income tax code will apply.
• There are no additional penalties or interest just the tax collected that otherwise would have been owed.
• Only the first-time home buyer can establish the account.
• A parent or other family member cannot open an account for a first-time home buyer and deduct any deposited amount.
• A parent could gift funds (without deduction) to a first-time home buyer that is then deposited by the first-time home buyer, although the tax deduction would likely not be relevant if it is not considered income.
• There are no deadlines for use of the funds, just the deductibility caps on how much each year can be deducted and the total deduction cap ($100,000).
• The first-time home buyer can deposit funds in excess of the caps but those amounts above the caps will not be deductible.
This is a great tool to try and promote more savings in preparation for first time home buyers and hopefully creating more equity at the time of purchase.
https://legislature.idaho.gov/wp-content/uploads/sessioninfo/2020/legislation/H0589.pdf
