It has been 4 years in the works… Blood, sweat, and tears (so many tears) have gone into putting a program in place to help first-time home buyers in the state of Iowa.
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 will go into effect January 1, 2018. This is what we know so far:
This bill allows individuals to open an interest-bearing 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.
An individual may establish more than one 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 here: https://www.legis.iowa.gov/legislation/BillBook?ga=87&ba=SF%20505
More information will be available on this great program later this summer/early fall. Stay tuned!