It has been 4 years in the works. Blood, sweat, and tears have gone into putting a first-time homebuyer program in place to help first-time homebuyers in the state of Iowa.
The bill officially passed in the Senate with a vote of 49-1 and passed in the House with a vote of 87-11. Governor Branstad signed the bill into law Tuesday, May 9, 2017 and it went into effect January 1, 2018.
What Is the Iowa First-Time Homebuyer Program?
This bill allows individuals to open an interest-bearing first-time homebuyers savings account with a state or federally chartered bank, savings and loan association, credit union or trust company in Iowa and designate the account as a first-time homebuyer savings account. The funds must be used to buy a property in Iowa.
A first-time homebuyer is identified as an Iowa resident who has not owned a single-family residence for at least three years prior to the home purchase for which the account’s funds are applied.
The First-Time Homebuyer Savings Account
An individual may establish more than one first-time homebuyers savings account as long as each account has a different beneficiary. This means that parents and grandparents can start an account for a child or grandchild!
There is no limit as to how much can be retained in each account. However, an account holder is allowed to deduct from the individual income tax the amount of contributions made during the year by the account holder to to the account holder’s accounts, not to exceed $2,000 per year or $4,000 for married taxpayers with a joint account. The interest earned on the account is not taxable and the yearly tax deduction can be taken up to 10 times (a max of 10 years).
As a reminder, this is a state tax deduction NOT a tax credit and it cannot be deducted on federal taxes. If the money is not used to buy an Iowa property, it may be subject to penalty. We will continue updating you as we find out more of the details; in the meantime, read the full legislation.
Finding Your Home in Iowa
If you’re ready to embark on the adventure of owning your first home, check out our other resources for homebuyers and reach out to an Iowa REALTOR to help!