Without a doubt, one of the largest obstacles in buying your first home is coming up with funds for down payment and closing costs. However, saving for a new home in Minnesota just got easier thanks to a new law supporting first-time homebuyers.
The First-Time Homebuyer Savings Account Act is a program that allows potential home owners to save money in a tax-preferred savings account. The law also permits others (like parents and grandparents) to contribute to a loved one’s home buying goals and receive a tax deduction from Minnesota state taxes.
How it Works
- The prospective homebuyer (or someone on their behalf) opens an account with a local bank or credit union.
- An individual may contribute up to $14,000 annually to the account and $28,000 for joint filers.
- The interest that accrues on the account can be deducted from Minnesota state income taxes, up to $5,000 for individuals and $10,000 for joint filers. Essentially, this means that the interest is free of state tax, but not free of federal income tax.
- Maximum contributions are set for joint filers at $100,000 and individual filers at $50,000.
- The funds must be used for a down payment or closing costs on a home purchase. If the funds are used for any other purpose, a tax penalty is imposed.
- You can open an account and start saving today!
The plan applies to first-time homebuyers and those re-entering the housing market, if they have not owned a home within three years. To qualify, potential homeowners need to make below $150,000 for individuals and $300,000 for married couples.
Call The Garatoni Group at 612-821-7456 to learn more about this exciting new program and how it can work for you. Take one step closer to making your dream of homeownership a reality!