Beginning January 1 of 2018, those looking to become first-time homebuyers in Iowa will have a new resource available to them. Governor Terry Branstad signed the legislation to make the First Time Homebuyers Savings Program official. This program authorizes tax-preferred First Time Homebuyer Savings Accounts.
This account has to be in the name of a sole individual who is a first-time homebuyer. According to the code, you are a "first-time homebuyer" if you have not owned a single-family or multifamily residence for the prior three years. You must also meet this criteria when named as a beneficiary of an account and when applying the money towards a qualifying purchase. This definition means this program will benefit those who do not currently own a home, but for people who are looking to be first-time homebuyers.
An individual can be named as the beneficiary of multiple accounts, and the named beneficiary can also be changed at any time. This means grandparents or parents can open an account in the name of their grandchild or child. These first-time home buying savings accounts must be interest bearing savings accounts established with an Iowa financial institution.
Account holders may exclude yearly deposits from Iowa adjusted gross income; individuals may exclude up to $2000 annually, and married couples who file a joint return may exclude up to $4000 if they utilize a joint account. Individual account holders may not exclude more than $20000 in their lifetime, and married couple may not exclude more than $40000. Yearly interest earned can also be excluded from Iowa income.
Withdrawals must be used by the beneficiary to purchase a single family home in Iowa within 10 years of the date the account was established. If the money is withdrawn for any other purpose or it is not used in 10 years, the account holder must include the withdrawal amount in his/her Iowa income. The account holder will also be assessed a tax penalty equal to 10 percent of the withdrawal amount if these occur. The only exceptions are if the withdrawal occurs because of the death of the account holder or because of garnishment, levy, or court order.
If you have further questions about this new program, contact your Ruhl&Ruhl Realtor. If you're looking to rent until you're ready to buy your first home, visit RuhlHomes.com/Rentals.
View the full bill here. View another article on the subject here.