First-Time Homebuyer Savings Account Q&A

A special type of savings account created by the Iowa legislature to help Iowans save for their first homes. This account offers tax advantages for individuals up to $2,000 a year and up to $4,000 a year for married taxpayers who file a joint return.

This is a great account for any Iowan who has never purchased, owned, or part-owned a home in Iowa or any other state for 3 years prior to account opening. We strongly recommend you seek the guidance of a tax or legal professional to ensure that you receive the full tax benefits available to First-Time Homebuyer Savings Account holders.

Iowa Falls State Bank is leading the way in providing a specific savings account that offers a high interest rate to future First-Time Homebuyers.

No, First-Time Homebuyer Savings Account must be a new, separate account designated for a first-time home purchase in Iowa.

A single account holder and married couples filing jointly can deposit more than stated limits each year, but the excess money is not eligible for a tax deduction and is treated as ordinary income.

Your account can stay open as long as you would like, however you will stop earning interest on Jan 1 of the tenth calendar year after the calendar year during which the account was first opened.

The First-Time Homebuyers Savings Account must be open a minimum of 90 days before funds can be used towards a qualified purchase.

The amount withdrawn for an unqualified use is taxed as gross income and also assessed a 10% penalty. The penalty will be waived if 1) the account holder dies, 2) the balance is disbursed as part of a garnishment, levy or other order including bankruptcy filing, or 3) the balance is transferred to another First-Time Homebuyer Savings Account.

You can open a First-Time Homebuyer Savings Account at Iowa Falls State Bank and start saving today. You can start taking tax deduction beginning in the 2018 tax year.

In tax year 2019, individuals can deduct up to $2,050 from their state adjusted gross income when they make deposits into a First-Time Homebuyer Savings Account. Couples can deduct up to $4,100 a year. It’s a dollar-for-dollar deduction up to the limits. (i.e., if an individual deposits $3,000, it’s a $2,000 deduction. If a couple deposits $6,000, it’s a $4,000 deduction.

Yes, as an “account holder” who established a savings account, you can choose a qualified beneficiary. If you are an Iowa taxpayer, you can also benefit from the state deduction. 

Savings can be used for down payments, loan origination charges, appraisal fees, deed charges, and other closing costs listed on the closing disclosure of a First-Time Homebuyer purchase.

Eligible single-family homes include newly-constructed homes, existing homes, manufactures homes, modular homes and condominium units.

No, as long as the money is used for a down payment or allowable closing costs of a first-time home purchase in the state of Iowa by a qualified beneficiary.

Deposits to the First-Time Homebuyer Savings Account are exempt from state taxes up to the annual limit. However, the deposits are still subject to federal taxes, depending on your individual tax situation. Annual earned interest on the account is all exempt from state tax, but is still subject to federal tax.

The deduction for contributions is subject to a life-time limit of ten times the account holders annual deduction limit. This would be reached in ten years if full allowable contributions were made yearly. We strongly recommend you seek the guidance of a tax or legal professional to ensure that you receive the full tax benefits available to First-Time Homebuyer Savings Account holders.