A First-Time Homebuyer Savings Account Can Provide a Foundation for the Future

Mississippi has signed into law a savings account program supporting first-time homebuyers. Known as the First-Time Homebuyer Savings Account Act, Mississippi is taking proactive measures to help state residents realize the dream of homeownership.

The First-Time Homebuyer Savings Account is for Mississippians who have never purchased, owned, or partially owned a home in Mississippi or any other state. There are many advantages to owning your own home such as financial stability through equity buildup, predictability in mortgage payments, privacy by not sharing walls, freedom to design your way, and community investment through civil engagements, local elections, and community volunteer work.

There are also numerous tax advantages to the First-Time Homebuyer Savings Account. Starting in 2018, individuals can deduct up to $2,500 from their state adjusted gross income when they make deposits into a First-Time Homebuyer Savings Account. Couples can deduct up to $5,000. It is a dollar-for-dollar deduction up to the limits. For example, if an individual chooses to deposit $50, then it is a $50 deduction. Again, the maximum individual deduction is $2,500, so if an individual chooses to deposit $3,000, the deduction caps at $2,500. Lastly, interest earned on the account is free from state income tax.

There are other advantages to the First-Time Homebuyer Savings Account aside from taxes. Although there are maximum tax deductions, there is no limit to how much money can be deposited in the savings account. Also, as long as the account holder remains a qualified first-time homebuyer, there is no specified time frame for how long the account can remain open. Additionally, the money from the 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 the settlement statement of the first-time purchase of a single-family home by a qualified beneficiary. Lastly, eligible single-family homes include newly-constructed homes, existing homes, manufactured homes, modular homes, mobile home, condominium units, and cooperatives.

One of the most significant advantages is that a parent or grandparent can open a First-Time Homebuyer Savings Account for their child or grandchild as long as the child or grandchild is the named as the qualified beneficiary. Once the child begins filing income taxes, he/she can take advantage of the tax deductions when they file their taxes. The First-Time Homebuyer Savings Account would make an excellent gift providing a foundation for your child or grandchild’s future.

The First-Time Homebuyer Savings Account Act was a legislative priority for Mississippi REALTORS®. REALTORS® are the Voice for Real Estate.

For more information, visit your financial institution and inquire about the First-Time Homebuyer Savings Account. You can also visit firsthomems.org to learn more.