Oregon’s First-Time Homebuyer Savings Account

Saving for a home purchase in Oregon may now earn you a tax break.

If you’re an Oregon resident saving for the purchase of a home you may be able to claim a tax deduction as you save and earn tax-free interest. How? Open a First-Time Homebuyer Savings Account or FTHSA.

Get ready to head down to your bank or credit union! January 1, 2019 is the first day to open a First-Time Homebuyer Savings Account in Oregon.

What is a FTHSA? (Gesundheit!)

A FTHSA is a special account dedicated to saving funds for the purchase of a primary residence. You claim a state tax deduction for:

• Up to $5000 of deposits per year (for individual or head of household filers) or;

• Up to $10,000 of deposits a year (for joint filers)

And interest earned on up to $50,000 is tax free too.

What can I buy?

The funds in your FTHSA can be used to pay the down payment and costs associated with the purchase of an existing home or building a new home. You can buy any single family dwelling that will be your primary residence — including a house, condo, townhome, manufactured home, trailer or mobile home.

In addition to a down payment, any costs that show up on a closing statement may be paid by or reimbursed from a FTHSA, too.

Not just for first-timers

As the name implies a “First-Time Homebuyer Savings Account” is for first-time buyers. But even those who’ve owned a home before may be eligible. If you’ve not purchased or owned a home in the past three years, you are considered a (born again) “first-time homebuyer”.

Oh, and you must be an Oregon resident.

Up to a decade to save and buy

January 1, 2019 is the first day you can open a FTHSA and the law is written to expire on January 1, 2037. Once you open the account, you can deposit funds to it and earn tax-free interest for up to 10 years. If you’ve not purchased a home 10 years from the date you opened your account the balance (including deposits and interest) becomes taxable.

What’s my tax break?

The amount of tax savings you get depends on how much you save and your Oregon tax bracket. Multiply the amount you imagine saving annually by your tax bracket to determine your potential savings.

For example, joint filers who save $10,000 and are in the (most common) 9% tax bracket, would save $900 in state taxes.

Because this is a State of Oregon program, all savings come on the Oregon tax return. The federal government will treat your account the same as any other savings account.

2019 Oregon Tax Brackets

Already shopping? Don’t miss out!

If you’ve already saved for your home purchase, don’t pass up on the opportunity to get an easy tax break. The law doesn’t specify a minimum amount of time funds must be held in a FTHSA. You could open a FTHSA, deposit the maximum amount of funds ($5,000 or $10,000, depending on your filing status) and withdraw the funds the very next day for closing. Passing money through a FTHSA appears to be all you need to do to secure a tax deduction for the year.

Gift a FTHSA

There is no limit to the amount of money that can be deposited to a FTHSA annually or in total. There is also no restriction on who can deposit funds to an account. Your family or friends can deposit funds to a FTHSA on your behalf. Only funds deposited by an eligible account owner are allowed to be claimed as a tax write-off.

If someone offers to contribute to a FTHSA, consider having your (wonderful) gift donor give the money to you to deposit to your account. The IRS allows up to $15,000 of tax free gifts per person per year. Up to that amount, a gift donor should not be taxed on their gift to you, and if you make the deposit to the FTHSA (rather than your donor), you should be able to claim the tax write off.

Limits to the fun

The legislation does phase out claiming of the tax write-off based on income. For the 2019 tax year, the maximum write-off is, as follows:

Any amount you deposit to your FTHSA but can’t write off that year, cannot be carried forward to future years. But the Oregon Department of Revenue is allowed to adjust the income limits

Withdrawals for other than a home purchase

If you take money out of a FTHSA for a purpose other than a home purchase, the amount you withdraw will be added to the income on your state tax filing and subject to a 5% penalty. You are however allowed to withdraw funds and roll them over to a different FTHSA account (if, say, you want to change banks).

The 5% penalty is waived if the account holder files bankruptcy, becomes disabled and is unable to work or dies. (But don’t die before you buy your home… that would be so sad!)

Caveat emptor

Be sure and seek qualified counsel from a tax advisor when making all decisions involving your income taxes. Your author is not a tax expert. Share a copy of the bill (found here) with your tax preparer.

Sounds great… I want one!

You can open a FTHSA with any bank or credit union eligible to do business in Oregon. You’re only allowed to hold cash in a FTHSA, not stocks, bonds, mutual funds, gold, cryptocurrency or other assets.

You’re allowed to own a FTHSA with someone else, so long as you file a joint tax return with the co-owner. But you can’t be connected to more than one FTHSA account.

The bank you choose will create a service agreement, but is not obligated to verify you are qualified, that your account satisfies the requirements or that you use the funds correctly.

The bank is required to provide a statement every year (before the end of January) including a few key pieces of information: creation date, account holder name(s) and amounts contributed and withdrawn during the past year. The rest of the record-keeping and state filing is up to you.

Good idea, Montana

First-Time Homebuyer Savings Accounts came about in Oregon when the legislature passed House Bill 4007, on March 3, 2018, making Oregon one of just a handful of states offering accounts of this nature. Montana pioneered the concept in 1998, and since then only Colorado, Alabama, Iowa, Mississippi, Minnesota and Virginia have followed suit. As of this writing, a similar bill is moving through the legislature in Pennsylvania, as well.

Spread the word!

Homebuyers in many states with FTHSA aren’t even aware these programs exist. Only 105 Virginia’s (105!) claimed a FTHSA write-off in 2014, and just 130 in 2015. Let’s make sure Oregonians know about and take advantage of Oregon’s version of the program.

Those already saving for a home can use a FTHSA to boost their savings. Family and friends looking to help out a hopeful home buyer can contribute to a FTHSA. And those dreaming of a home purchase now have a little extra incentive to start saving up.

Guaranteed Rate loves first-time buyers

At Guaranteed Rate, our goal is to meet every homebuyer wherever they are on the road to homeownership. Whether you’re just starting to think about maybe buying a home or are already on the hunt, we’re here to listen, answer your questions and guide you every step of the way. And when the time is right, we’ll help you get a great rate on the perfect loan to fit your needs. Call (503-799-3711) or email (juleef@rate.com) to get started (or apply online www.rate.com/juleef.

Not all applicants will be approved for financing. Guaranteed Rate, Inc. does not provide tax advice. All information provided in this publication is for informational and educational purposes only, and in no way is any of the content contained herein to be construed as financial, investment, or legal advice or instruction. Guaranteed Rate, Inc. does not guarantee the quality, accuracy, completeness or timelines of the information in this publication. While efforts are made to verify the information provided, the information should not be assumed to be error free. Some information in the publication may have been provided by third parties and has not necessarily been verified by Guaranteed Rate, Inc. Guaranteed Rate, Inc. its affiliates and subsidiaries do not assume any liability for the information contained herein, be it direct, indirect, consequential, special, or exemplary, or other damages whatsoever and howsoever caused, arising out of or in connection with the use of this publication or in reliance on the information, including any personal or pecuniary loss, whether the action is in contract, tort (including negligence) or other tortious action.

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