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2013 SESSION

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HB 1868 First-time home buyer; savings accounts for purchase of single-family residences, tax exemption.

Introduced by: Thomas A. Greason | all patrons    ...    notes | add to my profiles | history

SUMMARY AS PASSED HOUSE:

First-time home buyer savings account. Establishes beginning in 2013 first-time home buyer savings accounts that accrue tax-free income and that are to be used for saving funds for the purchase of homes by first-time home buyers. Funds in the account, including any income, would be exempt from individual income tax so long as withdrawals from the account are used for the down payment and allowable closing costs (eligible costs) for the purchase of a home by a first-time home buyer. The bill limits the amount of principal that can be contributed to any account to $50,000. Persons would be allowed to contribute only cash or marketable securities to a first-time home buyer savings account. Capital gains, interest income, or other income earned with regard to funds contained in the account would be excluded from income in computing Virginia individual income tax. However, if funds are withdrawn from the account for purposes other than to pay eligible costs, a penalty of 10 percent of the amount withdrawn would be imposed. In addition, the amount so withdrawn would be subject to individual income tax. No penalty or income tax would be imposed if the withdrawal is (i) because of the death or disability of the account beneficiary, (ii) a disbursement of assets pursuant to a filing for protection under federal bankruptcy laws, or (iii) a transfer of assets between first-time home buyer savings accounts.

SUMMARY AS INTRODUCED:

First-time home buyer savings account. Establishes beginning in 2013 first-time home buyer savings accounts that accrue tax-free income and that are to be used for saving funds for the purchase of homes by first-time home buyers. Funds in the account, including any income, would be exempt from individual income tax so long as withdrawals from the account are used for the down payment and allowable closing costs (eligible costs) for the purchase of a home by a first-time home buyer. Funds in the account would be required to be used for eligible costs within the 10-year period following the year in which the account was established.

Any resident of the Commonwealth would be allowed to maintain and make contributions to his first-time home buyer savings account. Only cash contributions could be made to the account. In 2013 an account holder would be allowed an individual income tax deduction equal to the amount the person contributed to his account, but not to exceed $13,000 per account. In 2014 and thereafter, the $13,000 maximum deduction per account would be increased annually by the same amount that the federal annual exclusion for gifts increases for the year. Capital gains, interest income, or other income earned with regard to funds contained in the account would be excluded from income in computing Virginia individual income tax.

However, if funds are withdrawn from the account for purposes other than to pay eligible costs, a penalty of 10 percent of the amount withdrawn would be imposed. In addition, the amount so withdrawn would be subject to individual income tax. No penalty or income tax would be imposed if the withdrawal is (i) because of the death or disability of the account beneficiary or (ii) a disbursement of assets pursuant to a filing for protection under federal bankruptcy laws.

If funds remain in the account at the end of the 10-year period, a penalty of 10 percent of the value of the funds remaining in the account would be imposed. In addition, individual income tax would be imposed on the value of the funds remaining in the account.