Who can set up a First-time Home Buyer Savings Account (first-time home buyer account)?
A first-time home buyer account can be set up by anyone planning to purchase a home in Oregon. Individuals have 10 years from when the account is opened to purchase a home. The first-time home buyer account must be opened between January 1, 2019 and December 31, 2026. In addition, the person can't have owned or purchased a residence in the three years prior to the date of their planned purchase.
Do I have to purchase a home in Oregon?
Yes. If you don't purchase a home in Oregon, you don't qualify for the subtraction and you will be required to add back any amounts you subtracted on previous tax returns. You may also be subject to a penalty on funds withdrawn for a non-qualifying purpose.
Do I have to be an Oregon resident to qualify?
Yes. You must be a resident of Oregon.
How much is the subtraction if I qualify?
The maximum subtraction allowed is $5,000 per year ($10,000 if you file a joint return and both you and your spouse have a First-time Home Buyer Savings Account, or you are both owners of a joint account). You may not subtract more than $50,000 in all tax years. Income limitations do apply. If your income is more than $104,000 ($149,000 for joint filers), the amount of the subtraction is reduced.
Please see Publication OR-17 for details.
What income can I subtract?
You can subtract both your contributions to the First-time Home Buyer Savings Account and earnings from that account (interest and dividends) up to the annual limitations. However, if your earnings and contributions exceed the annual limitations allowed, you must report the excess earnings on your Oregon return.
What if I want to transfer my First-time Home Buyer Savings Account to a different first-time home buyer account at another bank?
You're allowed to transfer the funds in any first-time home buyer account to any other first-time home buyer account without reporting it as income or incurring a penalty. The original first-time home buyer account must be closed before you can open the second account and the funds must be transferred within 60 days of closing the original account. You can't have two first-time home buyer accounts open at the same time.
What if I have a joint First-time Home Buyer Saving Account and I want to move the funds into separate accounts for me and my spouse?
You're allowed to transfer funds in any first-time home buyer account to any other first-time home buyer account(s) without reporting it as income or incurring a penalty. Yes. However, they won't be able to claim a subtraction for any funds they contribute to you. In addition, you won't be able to claim a subtraction for contributions you don't personally make. You will be able to claim a subtraction for any earnings (interest or dividends) in the account.
What are qualified First-time Home Buyer Savings Account expenditures?
Funds in your first-time home buyer account can be used for down payments, loan origination charges, appraisal fees, credit report fees, flood certifications, title charges, deed charges, and other closing costs on your settlement statement when purchasing a single-family home.
What happens if I don't end up purchasing a home?
The funds in the account must be used to purchase a home within 10 years of opening a First-time Home Buyer Savings Account. If funds are withdrawn within 10 years of opening the account for a reason other than buying a home, you will be required to pay a penalty. In addition, if you remove the funds at any time without purchasing a home, you'll need to claim the amounts you previously subtracted as an addition on your tax return. The addition to your income occurs in the year that you removed the funds from the first-time home buyer account for a nonqualifying purpose (for example, you remove the funds to pay for college tuition).
Are there exceptions when the penalty will not be imposed?
Yes. The penalty won't be imposed on funds that are withdrawn if a person has died, has filed for protection under the U.S. Bankruptcy Code, or has lost function of any portion of the body that permanently incapacitates them from regularly performing work at a gainful occupation. Also, if the funds are withdrawn more than 10 years after the account is opened, they won't be subject to a penalty. However, you'll still be required to add back any previously subtracted contributions and earnings.
Do I have to pay federal tax on deposits and earnings?
Yes. Although deposits and earnings to the first-time buyer account are exempt from state taxes up to the annual limit, they're still subject to federal taxes, depending on your individual tax situation.
Can I contribute more money than allowed as a subtraction and carry over the remainder to take a subtraction in a future year?
Amounts contributed can't be carried forward to the next tax year if you weren't able to use the subtraction or you reached the maximum amount allowed.
If you're not a first-time home buyer, we have other options for you! Whether you're looking into buying a home, refinancing your mortgage or tapping into your home's equity, Central Willamette can help!