Buying your first home is exciting, and saving up for your first home in Alabama just got easier! Here’s what to know about Alabama’s First-Time Homebuyers Savings Account so you can start making your dream a reality.
Alabama’s First-Time Homebuyers Savings Account
Good news for first-time or second-chance homebuyers in Alabama! The legislature recently passed a bill renewing Alabama’s First-Time Homebuyer Savings Account.
With this renewal, two main outcomes are worth noting. First of all, House Bill 171 will renew the act for five more years. Originally, accounts could not be opened beyond March 28, 2023.
Secondly, the amount of time account holders can have an account was extended too. It basically doubled, going from five years to 10 years.
Many potential first-time homebuyers can breathe a sigh of relief knowing they have more time to save and search for the perfect first home! This is particularly helpful since today’s real estate trends include lower inventory and rising costs.
What is the First-Time Homebuyers Savings Account?
So, what is Alabama’s First-Time Homebuyer Savings Account exactly?
In a nutshell, it lets Alabamians create a tax-free savings account to be used toward the purchase of a single-family home.
Of course, you do have to be a first-time homebuyer or second-chance homebuyer.
Asking yourself what’s a second-chance homebuyer? In this case, it refers to individuals who have not owned a home in the last 10 years.
The money saved in the account may be applied to the down payment and/or the closing costs.
There is no limit to the amount of money you can deposit. However, the income tax deductions from the deposits are limited.
What’s the tax deduction limit?
The income tax deduction available for individuals is limited to $5,000 per year. That’s a total of $25,000 across five years.
But if it is a joint account and the account holders file taxes jointly, that figure increases to $10,000 per year for a total of $50,000 in five years.
Where can you open an account?
A First-Time Homebuyer Savings Account can be opened at any financial institution in the state. That includes local banks and credit unions, for instance.
Finally, when it’s time for you to look for your first house, work with a local Realtor! They have a responsibility to look out for your best interests—financial included. What’s more, they have the knowledge and expertise needed to navigate the local market. Keep reading our blogs for more real estate news and helpful tips!