Virginia has established a new law called First-Time Home Buyer Savings Accounts (HB 331). Vital to first-time homebuyers, this new law allows them to save their money through a savings account, CD’s, Bonds, etc., while also enabling them to grow their money without being taxed. Furthermore, this bill also permits first-time buyers to subtract the amount saved from their income on their taxes. As such, these savings and/or investments can be set up by the individual(s) – including parents or grandparents – provided it is for the purchase of a home.
This law also allows the first-time homebuyer(s) to set aside a maximum amount of up to $50,000 through cash, investments or insurance policies, however the growth cannot exceed $150,000. A special account DOES NOT need to be opened in order to participate, however an existing account WILL have to be noted and therefore designated for the homebuyer savings program. If money is withdrawn from this account and that money is not put towards any down payments, closing costs, or any other purpose towards the home buying process then the income previously subtracted would be subject to recapture – plus a 5% penalty and the Commonwealth will tax the amount that was withdrawn.
This is an excellent way to help homebuyers make a great financial decision, while also helping them save money to purchase a home.
For more details contact Lori and Lisa today!