Beginning January 1, 2019 and ending December 31, 2026, Oregon allows an income subtraction for first time home buyers with qualified savings accounts in the state. This program allows qualified individuals to deduct up to $5,000 (single) or up to $10,000 (married filing jointly) from taxable income per year.
- You must be an Oregon resident.
- You must be a first time home buyer, planning to purchase a home in Oregon, who has not owned or purchased a residence in the three years prior to the date of the planned purchase.
- You should have taxable income below $104,000 (single) or $149,000 (married filing jointly). Income exceeding these amounts may still qualify but will reduce the amount of the subtraction.
Setting Up an Account
- Accounts may be established at any financial institution that offers First-time Home Buyers Savings Accounts in Oregon. Ask financial institutions, including credit unions, if they participate.
Spending the Funds
- Funds in the First-time Home Buyer Savings account can be spent on a down payment, closing costs, realtor fees, appraisal costs, and loan origination fees.
- The subtraction limit includes both contributions and earnings from the account. If earnings and contributions exceed the annual limitation allowed, the excess earnings must be reported on your Oregon tax return.
- Earnings from First-time Home Buyer Savings accounts, while exempt from Oregon income tax, are subject to federal income tax.
- Individuals have 10 years from the date the account is opened to purchase a single-family home or they may be subject to a 5% penalty and an addition to income of all amounts previously deducted. If funds are withdrawn from the account within 10 years of opening the account and are not used to purchase a home, all amounts previously subtracted must be claimed as an addition on the individual’s tax return.
- Someone who is not an account holder is allowed to contribute to a First-time Home Buyer Savings account; however, he or she is not allowed to claim a subtraction for funds contributed. The account holder is allowed to claim a subtraction for any earnings in the account resulting from contributions made by others.