What You Should Know If You're Saving For Your First Home
Saving up for your first home can feel overwhelming. You’re used to just paying a monthly rent; how will you ever find the money for a down payment? Luckily, if you’re a resident of Colorado, there’s an easy way to get a jump start on saving for a house. It’s called a first-time homebuyer savings account.
Using a first-time homebuyer savings account (FHSA) allows you to put up to $50,000 towards paying for your first home. Whatever you earn through those funds (interest and capital gains) are free from Colorado state taxes—forever! FHSAs can be nearly any type of account you can have with a financial institution, including mutual funds, CDs, brokerage (stocks, bonds, etc.), money markets, insurance, even a savings account or individual stock. You can either set up a new account as an FSHA, or you can designate a current account as one. All you have to do is include a form when you file your state taxes that will categorize the account as an FHSA and therefore exempt from being taxed on the earnings.
Once you’ve put the money towards a home, you simply have to send in a form to the Department of Revenue to prove the funds were spent on an “eligible cost.” In other words, you spent the money on some sort of expense associated with buying a home, such as the down payment, not on a vacation to the Bahamas! The money in the FHSA doesn’t have to be spent on your own first home; you are able to give it to someone else, such as a child, grandchild, or even friend, as long as they’re a first-time homebuyer. Likewise, if you’re buying a home with someone who isn’t a first-time homebuyer, the funds are still eligible as long as you are.
If you think you’ll want to buy a house in Colorado at any point in the future, it’s worth setting up an FHSA now. Check out this link for more information. If you’re interested in learning more about the homebuying process in general, join us for our First-Time Home Buyer Seminar on March 28 at 6pm.
Blog Archive2019-04-18 13:04:29
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