The 2017 Iowa legislature passed a law that created a new income tax credit for first-time homebuyers. Iowa residents will be able to take advantage of the new tax credit on deposits made after January 1, 2018.
HOW IT WORKS:
- A qualifying first-time homebuyer savings account must be an interest-bearing savings account and established with a state or federally chartered bank, savings and loan association, credit union or trust company in Iowa
- The account holder can make unlimited deposits each year to the homebuyer savings account
- The income tax deduction is limited to $2,000 per year when filing individually and $4,000 per year when filing jointly
- Interest earned on account balances is exempt from state tax
- Accounts can be opened in another person’s name. For example, a parent could open an account and contribute to it as a gift to a child. As long as the funds are used towards the purchase of a first home, it will qualify for the tax deduction
- The maximum amount that qualifies for the exemption will be adjusted annual of inflation
- The money within an account is available for up to 10 years to be used for the qualifying purchase costs of a single-family residence
To learn more contact your tax professional.