Tax Savings for First-Time Homebuyers
The Oregon Legislature passed a bill (HB 4007) that provides tax benefits for those saving for their first home.
First-time homebuyers in Oregon may be allowed to deduct up to $5,000 ($10,000 if married filing jointly) from their taxable income for deposits in an Oregon First-Time Homebuyers Savings Account (FTHSA). The total amount of principal and earnings is limited to $50,000. The benefit is reduced as income increases. The reduction begins when federal adjusted gross income exceeds $149,000 on a jointly filed tax return and $104,000 on all other tax returns. If held jointly, both must qualify as first-time homebuyers. Any interest or other income earned on an FTHSA is also exempt from tax.
If funds are not used to purchase a home within 10 years or are withdrawn for other purposes, the amounts previously deducted will be taxable to the taxpayer and there may be penalties.
An account can be set up through any financial institution that offers FTHSA through December 31, 2026. Some examples of what the funds in an FTHSA may be used for are down payments, closing costs and realtor fees.
**The 2020 standard deduction amount is $12,400 for single filers and $24,800 for taxpayers married filing jointly. If itemized deductions (the most common being property taxes, state and local taxes, mortgage interest, and charitable contributions) exceed the standard deduction, there is a further $10,000 limitation on total combined state and local taxes (including property tax) that may make it difficult to exceed the standard deduction. In planning for the purchase of a personal residence, be mindful of these two hurdles that may limit tax savings on mortgage interest and property taxes paid.
**As featured on redfin. https://www.redfin.com/blog/genius-tax-tips-for-millennial-homebuyers/