Schaub Team Blog
Posted by Jamie Jewell on Aug 19 , 2022 - 07:15 am
Future home buyers have a great opportunity to save toward their purchase. Michigan legislature and the Governor are supporting Michigan residents and homeownership. The Michigan First-Time Homebuyer Savings Account (FHSA) Program is dedicated to saving for a first-time home purchase in Michigan. Account holders enjoy deducting most, if not all, of their contributions to an FHSA from their state income tax while seeing tax-free gains on their qualified investments. These are savings that can really add up!
What you need to know:
Who qualifies as a first-time homebuyer?
A first-time homebuyer is a Michigan resident who has not individually or jointly owned or purchased a single-family residence during a three-year period prior to the purchase date of a Michigan single-family residence.
Can account holders decide which first-time homebuyer to help?
Determine the account's qualified beneficiary by asking:
- Will it be the account holder who qualifies as the first-time homebuyer or another Michigan resident?
- Will someone be investing to a benefit of a child, grandchild, or another future homeowner?
What are the account options?
- Potential account holders should consult with their tax preparer or financial advisor to determine the correct savings vehicle to best meet their needs through a traditional savings account or brokerage account.
What are the rules for setting up an FHSA account?
The FHSA must be a newly established account. Accounts can be established individually or jointly with another individual with whom one files a joint tax return.
What benefits can account holders expect?
Account holders could see up to 20 years of contribution deductibility off their Michigan income taxes. Annual contribution thresholds are up to $5,000 for a single tax return and $10,000 for a joint filing. After the $50,000 maximum account balance is reached, interest can continue to grow tax-free.
What are account holders' tax obligations?
Account holders will identify their FHSA when filing a Michigan Income Tax return. Before the end of 2022, the Michigan Department of Treasury will have a form available to complete and include with a tax filing in order to designate an FHSA-qualified beneficiary and the amount of the tax deduction. Information will be updated on the First Home Michigan website as it becomes available. Review the Michigan Department of Treasury website for answers about the program.
What about record keeping?
Account holders should retain records documenting the establishment of the account, and all activities and transactions relating to the self-directed FHSA. Financial institutions have no formal role in administering, tracking, reporting, or designating account activity.
Spend the savings on homeownership!
- Eligible costs that account holders can pay or reimburse with FHSA funds include the down payment and allowing closing costs shown on a settlement statement or an executed sales agreement.
- Withdrawals may not be made until one year after the account is opened and designated as an FHSA.
- Account holders will be subject to penalties and loss of tax benefits if FHSA funds are used for items other than payment or reimbursement of eligible costs tied to the purchase of a single-family residence in Michigan by the qualified beneficiary.
Realtors® are extremely knowledgeable about the homeownership process. By promoting smart savings and financial literacy, this unique program supports responsible homeownership by our next generation. This will encourage investment and economic growth in our great state, retain and anchor our workforce here, and strengthen our vibrant local communities.
This article was provided by Michigan Realtors Association.