The First-Time Homebuyers Savings Account (FTHSA) is a special type of savings account that helps Iowans save for a first home. It includes provisions that allow individuals, including those who already own a home, to make tax deductible contributions into an account to be used by a designated person for certain expenses related to purchasing a home. The account must be opened at a financial institution in Iowa, including at United Bank & Trust.
Here's how it works:
- Open either a United Bank & Trust Savings account or Money Market account.
- Each year, account holders may contribute an unlimited amount of money into their FTHSA. However, the amount of such contributions that a taxpayer may deduct from their Iowa adjusted gross income for tax purposes is limited. The maximum annual deduction is adjusted each year for inflation and differs depending on filing status.
- Interest earned on account balances is exempt from state income tax.
- Taxpayers may establish multiple accounts as long as each account has different designated beneficiaries.
- Accounts can be opened in another person’s name. For example, a parent could open a bank account and contribute to it as a gift to a child. As long as the funds are used toward the purchase of a first home, it will qualify for the tax deduction.
- The contributions are required to be in the account for 90 days prior to being used.
- Any remaining money in the account more than 10 years after the account was opened is considered withdrawn, and the account can no longer be a First-Time Homebuyers Savings Account after that time.
For additional information provided by the Iowa Department of Revenue, click here. Please consult your tax advisor for additional tax related questions.