July 17, 2018

VA OKs Tax-Free Savings Accounts for 1st-Time Home Buyers

http://www.dreamstime.com/royalty-free-stock-photography-virginia-statehouse-image25041137Virginia lawmakers passed a bill last month that allows first-time homebuyers to establish savings accounts for funds used solely for down payments or closing costs. Beginning July 1, Virginia first-time homebuyers will be able to contribute up to $50,000 to the savings accounts, with account earnings exempt from state taxes.

“The bill establishes an individual income tax subtraction for income earned on contributions to the account,” according to the bill summary. “However, if moneys are withdrawn from the account for purposes other than to pay eligible costs, any income previously subtracted would be subject to recapture by the Commonwealth, and a five percent penalty would be imposed.”

According to the Virginia Association of Realtors the types of accounts can include “savings accounts, mutual funds, brokerage accounts” among others.

Passed by the Virginia House in Feb. 11 in a 99-0 vote, the Senate took up the measure and passed it Feb. 27 in a 39-1 vote. Senate Democrat Henry Marsh (VA-16) was the sole “no” vote. Gov. Terry McAuliffe is expected to sign the bill into law. You can read the bill summary and link to the entire bill here.

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