The First Step: Savings
What’s the first step on the road to homeownership? Saving your money. And now, thanks to a new law in Alabama, building up your savings account just got easier. First-time homebuyers can now create a tax-free savings account to be used towards the purchase of their first home. That’s right, tax free! This new resource in Alabama is exclusively for first-time buyers or those reentering the housing market if you haven’t owned a home in the last 10 years.
Individuals or couples can open one of these tax-free savings accounts at any local bank, credit union or other financial institution in Alabama. The principal deposits and earnings will be deductible on your state income taxes. Savings from the account can be used to pay for the down payment and/or closing costs for the purchase of a single-family dwelling.
Check out these downloadable infographics to learn more about the availability of Alabama’s First-Time Homebuyer Savings Account Program. Be sure to contact your local REALTOR® to learn more!
Tell Me More: FAQs
1. What is it?
2. Who is it for?
3. Where can I create an account?
4. When can I create one?
5. Why would I want to create one?
6. How does it work?
7. How long can my account remain open?
8. Is there a limit on how much money I can deposit?
9. Can I put more than $5,000 into my First-time/Second-Chance Homebuyer Savings Account one year?
10. What can deposits and interest be used for?
11. What homes are eligible?
12. Can I deposit First-Time/Second-Chance Homebuyer Savings into an existing account that contains funds for a different purpose?
13. Do I pay Alabama taxes when I pull money out of my First-Time/Second-chance Homebuyer Savings Account?
14. What if I use the money for something other than a first-time or second-chance home purchase?
15. Can I receive a deduction for deposits into another person’s First-Time/Second-Chance Homebuyer Savings Account?
16. What if the account holder dies?
17. How do I take the deduction with the Alabama Department of Revenue?
18. What if I move out of Alabama or purchase a house outside of Alabama?
19. How do I use the savings account funds to purchase a residence?
20. What do I do when I purchase a home using the savings account funds?
21. I deposited $5,000 in a savings account and only spent $4,500 on closing costs and the down-payment. What do I do?
22. What are the rules for rolling over an FHSA into another FHSA?
23. When my current FHSA expires, can I roll it into a new FHSA without penalty?
24. Can I open an FHSA account if I lost my home to foreclosure 8 years ago and will purchase a home in 2 to 5 years?
25. My FHSA expired after 5 years and I was not able to purchase a home. What happens to the money in the account?
26. Do I pay federal taxes on the money?
|Federal Taxes||Alabama Taxes|
|Deposits into First-Time/Second
Change Savings Account
|Not Deductable||Deductible up to $5,000 for individuals ($25,000 total deduction) & 10,000 for couples ($50,000 total deductions)|
|Interest Earned in Account||Taxable||Not taxable|
|Withdrawals for Eligible Expenses||No effect||Not taxable|
|Withdrawals for Ineligible Expenses||No effect||Taxable and possible penalty|
Disclaimer: This FAQ is meant to provide general information only. The FAQ is not intended and should not be construed to be legal or tax advice. Questions should be directed to a qualified legal or tax professional.
Although all Alabama financial institutions are eligible to offer a First-Time Homebuyer Savings Account, here is a confirmed list of participating banks.
Alabama One Credit Union - Tuscaloosa Branch
AuburnBank - Auburn Branch
BancorpSouth - Offered at all branches
First Federal Bank - Tuscaloosa Branch
Regions - Birmingham Branches
Synovus - Offered at all branches
Trustmark National Bank - Offered at all branches
The Alabama Association of REALTORS® (AAR) is the largest statewide organization of real estate professionals comprised of over 16,000 members from 25 boards and 1,200 real estate companies. United by adherence to a Code of Ethics, our members work as real estate professionals in the sale, lease, appraisal, management and development of residential, commercial, rural and resort properties throughout Alabama.
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