Buying a House? These States Offer Tax Incentives for Your First Down Payment
Americans’ financial circumstances are in much better shape today than during the 2008 Great Recession. With more job security and higher income, the prospect of buying your first home is more appealing than ever, and now your state may also be willing to help with your first big purchase by offering an attractive tax break in the form of ‘first-time home buyer savings accounts’.
New State-Offered Program
Yvette Best from Best Services Unlimited says that with the recent tax breaks and deductions, prospective home buyers have the perfect opportunity to invest in their first property. There are several ways new homeowners can lower their tax liability after buying a house which can save them thousands of dollars in the form of housing credits and tax deductions.
A new program called first-time home buyer savings accounts, approved by a number of state legislatures around the country, allows potential homeowners to save money for their mortgage down payment. More than half a dozen states have already authorized the bill, with Oregon and Alabama as the most recent states to join. Others may also consider adding them to their legislatures in the future.
The accounts provide a great incentive for future homeowners to take advantage of the tax breaks and save more money for their first down payment. In some states, these tax advantaged programs aren’t just for the first-time home buyers but also for those who have previously owned a home and are investing in their second property.
Rising Home Prices
Todd Umbenhauer, the chairman of Pennsylvania Association of Realtors, said that in the past few years, the number of new homeowners entering the market has been shrinking because of the rising home prices which is making harder for Americans to meet down payments.
According to a survey by the National Association of Realtors, first time home buyers accounted for less than 32 per cent of the home sales in 2017, a number far less than the 40 per cent average in the past.
Umbenhauer thinks that the high demands and limited inventory is driving up home prices in the country with average sale prices soaring above $238,800. A study by Zillow shows that average property value has risen by 8.7 per cent in one year and is expected to continue on an upward trend next year as well.
In Pennsylvania, the tax advantaged programs allow first-time and recurring homebuyers to save up to $50,000 in a separate account over 10 years using tax-free earnings. Those who file taxed individually can only make an annual contribution of $5,000 or less whereas married couples filing joint tax returns can put up to $10,000 in the designated savings account. All contributions are tax-deductible on state returns.
More States Introduce Savings Program
Savers can open their account in a bank, brokerage or any other state-operate financial institution. The account can either be in the name of the person making the contribution or a beneficiary chosen by the saver, and like all state programs, the funds are subjected to rules and regulations regarding a specific timeframe in which the money must be used specifically with the intention of buying a house.
Failure to use the money in a specified timeframe could result in severe penalties. Homeowners may also be subjected to additional rules if they decide to transfer their funds to a different account or financial institution.
Those in support of the saving program say that the tax benefits could offset the rising interest payments on debt and increasing home prices, helping upper middle class families to save money for down payments more easily. Public Policy analyst Daniel Hauser says that in parts of Oregon, home prices have risen so high that saving for down payments seems impossible. The state will also introduce first-time home buyer savings accounts from 2019 onwards which will only be available to those earning $149,000 or lower in gross annual income.
Montana was one of the first states to pass the homeowner savings bill in 1998 and other states including Minnesota, Colorado, Iowa and Mississippi have followed suit in the past few years. Although the state of Virginia has introduced the program since 2014, officials claim that very few people have taken advantage of the tax deductions.
Do you think the new tax breaks for homebuyers are a good incentive to increase participation in the real estate market?
More in sidebar
The Luxurious, Mind-Blowing Lifestyle of Kylie Jenner
Kylie Jenner has officially earned herself the title of the “youngest self-made billionaire” in the world. Even though there are people...March 25, 2020
Real Estate Market Unscathed after Recent Economic Dips
In the last decade, Pakistan’s realty market has undergone considerable maturity. At present, their housing economy has developed the ability to withstand...March 25, 2020
You Won’t Believe How These Elusive Criminals Escaped the Law!
Eventually, the law is going to catch up with ‘on the run’ criminals. But some criminals vanish and disappear without a...March 25, 2020
Climatologists Alarmed as Global Warming Hits New Record
Climate change broke a new record last month: A news report by NOAA revealed that for 400 consecutive months – that...March 24, 2020
Japan Is Taking SERIOUS Countermeasures Against the US Metal Tariffs
Japan recently notified the World Trade Organization (WTO) that the nation reserves the right to take countermeasures against U.S.’s imposed tariff on metals...March 24, 2020
130 Million Years Old Dinosaur Eggs Found in a Chinese ‘Hometown of Dinosaurs’
A shocking discovery was made a few weeks ago when construction workers in a popular town in China found more than...March 24, 2020
Fewer Young Americans are Purchasing Houses! Could High Student Debt be the Reason?
The prospect of buying a home early on has always been a dream for most young Americans. Indeed, homeownership is every...March 11, 2020
Apple Hits Trillion-Dollar Market Cap Once Again, But Will This be the Final Time?
Apple is one of the most successful companies in the world, and that they have over a billion devices in use...March 10, 2020
As Housing Prices Rise, This City Becomes the Most Expensive to Live in the U.S.
Silicon Valley has just been worsted by the Big Apple in the race for becoming the most expensive city to live...March 10, 2020