Opening a State Savings Bank First-time Homebuyer Savings Account (FTHSA) is a smart way to save for a first home. Our FTHSA is a tax-advantaged account available to qualified residents of Iowa living in Polk, Jasper, and surrounding counties.
A FTHSA is a special type of savings account created by the Iowa legislature to help Iowans save for their first homes. It includes provisions that allow individuals, including those who already own a home, to make tax-deductible contributions into an account to be used by a designated person saving to own a first home.
A first-time homebuyer savings account has several benefits including:
In addition to the benefits provided under the law, when you open your FTHSA at State Savings Bank, we provide you with a dedicated first-time homebuyer specialist to help you or your account beneficiary navigate all steps of the process. From account opening, to loan pre-qualification, to help understanding mortgage options, this is more than a deposit account, it's a relationship.
Additionally, we've put together a First Homebuyer Guide full of home financing resources and additional savings tips broken down in easy-to-understand-sections. You can find it here.
You are responsible for designating a beneficiary of the account and for ensuring the beneficiary's eligibility as a first-time homebuyer, ensuring that the funds are withdrawn in connection with a qualified home purchase, and for keeping receipts and records to support the account's contributions and distributions. The law indicates:
The following FAQs provide general answers to common questions about FTHSA. Please refer to 2017 Iowa Acts Senate File 505 for definitive legal guidelines and instructions.
Iowa Senate File 505 defines a first time homebuyer as an individual who is a resident of Iowa and who does not own, either individually or jointly, a single-family or multi-family residence for a period of three years prior to the date on which the individual is named as a designated beneficiary of a first-time homebuyer savings account and the date of the qualified home purchase for which the eligible home costs are paid or reimbursed from a first-time homebuyer savings account.
Yes, you may open a FTHSA even if you are a home owner provided it was established for the purpose of paying or reimbursing a designated beneficiary's eligible home costs in connection with a qualified home purchase. You may not be the account's designated beneficiary; you must designate an eligible beneficiary who qualifies as a first-time home buyer who must use the money for the purchase of a single-family residence in Iowa. The law includes penalties if the account is misused.
Yes. You may establish more than one account as long as each account has a different designated beneficiary.
Yes. An individual may be both the account holder and the beneficiary of the same account and an individual can be the designated beneficiary of more than one account.
While a regular savings or checking account may pay similar interest, only an account officially designated as a FTHSA allows you to deduct your contributions on your Iowa income tax return.
If you want to take advantage of the benefits of a FTHSA, we recommend you keep funds you are saving for a home purchase in a separate account. You do not need to close your existing savings account but opening a FTHSA simplifies your record keeping, lowers the chance of accidently using the funds for a unqualified purpose and helps us ensure you get up-to-date information about this specialized account. This is an easy process and once we set you up, you can easily view and manage your FTHSA along with all your other accounts via online banking.
A FTHSA is a deposit account created for the purpose of saving for a down payment. A variety of first-time homebuyer assistance programs exist for the purpose of obtaining or closing the mortgage such as grants that help with down payment or closing costs. It is possible a FTHSA beneficiary may also qualify for additional homebuyer assistance programs when ready to make a purchase. Your State Savings Bank mortgage specialist will explain available programs and guide you through the process.
The law stipulates that the funds must be used for a qualified home purchase, defined as a single-family residence in Iowa. The law further indicates single-family residence means a single family residence owned and occupied by a designated beneficiary as the designated beneficiary's principal residence, including but not limited to a manufactured home, mobile home, condominium unit, or cooperative.
According to the Iowa Department of Revenue, any amount withdrawn from a FTHSA for a non-qualifying purpose during the tax year must be added to the account holder's Iowa net income for that year, to the extent the amount was previously deducted as a contribution. Any withdrawal that must be added to the account holder's net income is subject to a 10% penalty, unless the withdrawal was made due to the death of the account holder or due to a garnishment, levy, or other order. In calculating Iowa taxable income, a taxpayer must add back any amounts deducted at the federal level and paid or reimbursed for qualifying purposes from funds in a FTHSA.
The deduction for contributions is subject to a lifetime limit of ten times the account holder's annual deduction limit. This would be reached in ten years if full allowable contributions were made yearly. We encourage you to seek the guidance of a tax or legal professional to ensure that you receive the full tax benefits available to FTHSA account holders.
The account must be open a minimum of 90 days before funds can be used toward a qualified home purchase.
The IRS allows a person to "gift" up to $15,000 in 2018 tax free. If a FTHSA owner gifts more than the maximum allowed in a given year to a beneficiary, the account owner will have to file a gift tax return to tell the IRS that a portion of their lifetime tax exclusion ($11.2 million for tax year 2018) was used. We recommend you seek the guidance of a tax or legal advisor if this is a possible scenario for you.
Reach out to a first-time homebuyer specialist located in either Baxter, Iowa or Des Moines, Iowa.
4800 Mills Civic Parkway
West Des Moines, IA 50265
102 S. Main, PO Box 67
Baxter, IA 50028