Idaho Tax Deduction for First-Time Home Buyers
With real estate costs across Idaho continuing to rise, the prospect of home ownership for many first-time homebuyers may seem more financially daunting than ever for some Gem State taxpayers. Thankfully, beginning in 2020, a new law has passed in an attempt to aid first-time homebuyers in the state of Idaho through potential tax benefits. Idaho Code section 63-3022V: Deduction For First-Time Home Buyers, allows individuals who open a First-Time Home Buyer Savings Account deductions on their Idaho return equal to their contributions into the account (maximum $15,000 a year for single filers, $30,000 for married couples), with a lifetime deduction limit of up to $100,000. Along with the immediate tax deduction for contributions, any interest earned on the account is deducted from the Idaho taxable income of the account holder. In order to qualify to take advantage of the deduction, taxpayers must never have owned a home (in Idaho or otherwise), reside in the state of Idaho, and have filed an income tax return in Idaho for the most recent year. Married individuals filing jointly can still qualify, as long as one spouse is a first-time homebuyer, and one spouse (not necessarily the same one) has filed an income tax return in Idaho for the most recent taxable year. When funds are withdrawn from the account, they must be used towards a “qualified home purchase,” defined as a single-family residence within the state of Idaho, either owned or occupied, or under contract to be constructed by the account owner, and may include, but are not limited to, a manufactured home, mobile home, condominium unit, or townhome.
While this program may be well suited for Idaho residents who dream of one day owning a home in the far future, it can also benefit those wishing to purchase their first home as early as 2020. The law stipulates that the funds must be deposited into the First-Time Home Buyer Savings Account for a minimum of thirty days before withdrawals can be made, but once the thirty day requirement passes, the account assets can be used towards eligible home costs (including down payments or any other related costs, fees, and taxes associated with the qualified home purchase). This means that a married couple could open an account, deposit up to $30,000, wait the required thirty days, and then withdraw those funds and use them towards the down payment on their first home. Assuming an Idaho state income tax rate of 6.925%, the couple would save themselves $2,078 on their state taxes, simply by opening an account and waiting!
If you are interested in opening a First-Time Home Buyer savings account, contact your financial institution, or give us a call if you have any questions or concerns.
Aaron Lavarias, CPA
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