HB248 Alabama 2018 Session

Summary

Primary Sponsor

Kyle South

Republican

Session

Regular Session 2018

Title

Home buyers, first-time, savings accounts authorized to save funds for a down payment and closing costs, income tax deduction for contributions

Summary

The Alabama First-time and Second Chance Home Buyer Savings Account Act creates a state tax-advantaged savings account to help eligible buyers save for a down payment and closing costs for a home in Alabama.

What This Bill Does

It allows eligible Alabama residents to open a savings account designated for first-time and second-chance home buyers starting January 1, 2019. Funds can be used only for eligible costs—down payment and closing costs—for purchasing a single-family residence in Alabama. Account holders can get a state tax deduction for contributions and exclude earnings from Alabama income tax for up to five years, within aggregate limits; withdrawals for non-eligible costs trigger taxes and penalties, with certain exceptions and transfer options to avoid penalties.

Who It Affects

• First-time and second-chance home buyers in Alabama who have not owned a single-family residence in the prior 3–10 years and plan to buy a home in Alabama; they may open accounts, contribute, and receive tax benefits if funds are used for eligible costs.
• Financial institutions that offer the accounts and the Alabama Department of Revenue, which administers the program, processes forms, and enforces reporting and penalties.

Key Provisions

• Establishes the Alabama First-time and Second Chance Home Buyer Savings Account Act and begins accepting accounts on January 1, 2019.
• Accounts may be opened by individuals or jointly with another eligible buyer; joint accounts are available for taxpayers who file a joint Alabama income tax return; contributions may come from the account holder or others and must be cash or marketable securities.
• Funds must be used only for eligible costs (down payment and allowable closing costs) for purchasing a single-family residence in Alabama; costs incurred before account establishment are not eligible.
• Tax benefits include a state income tax deduction for contributions and exclusion of earnings from taxable income for up to five years, with a five-year aggregate limit (roughly $30,000 for individuals and $60,000 for joint accounts, including principal and earnings). Funds must remain in the account to qualify for the deduction and exclusion, and cannot be used for out-of-state purchases.
• Penalties apply if funds are withdrawn for non-eligible costs: the entire balance is included in taxable income and a 10% penalty applies, with certain exceptions (death, disability, unemployment benefits, bankruptcy) and a 60-day transfer option to another qualifying account to avoid penalties.
• Financial institutions must create designated accounts, provide annual statements, and designate funds as the special savings accounts; the Department of Revenue handles reporting, forms, and enforcement, including annual summaries of deductions claimed and deposits deducted.

AI-generated summary using openai/gpt-5-nano on Feb 24, 2026. May contain errors — refer to the official bill text for accuracy.

Subjects

Banks and Banking