SB201 Alabama 2018 Session

Summary

Primary Sponsor

Trip Pittman

Republican

Session

Regular Session 2018

Title

First-time home buyers, to establish ability to open first-time home buyer savings accounts to save funds for a down payment and closing costs and establish a tax deduction for contributions to the account

Summary

Creates the Alabama First-time Home Buyer Savings Account program to help first-time buyers save for a down payment and closing costs with tax incentives.

What This Bill Does

It allows a first-time home buyer to open a savings account designated for paying eligible costs on the purchase of a home in Alabama. It provides a state tax deduction for contributions: up to $6,000 per year for individuals or $12,000 per year for joint filers for up to five years, and earnings on the account are excluded from Alabama taxable income. Withdrawals must be used for eligible costs; withdrawals for other purposes trigger penalties (the entire balance is included in income and a 10% penalty), with exceptions and transfers between accounts allowed to avoid penalties. The program applies to purchases of single-family homes in Alabama and includes annual reporting by the Department of Revenue and statements from financial institutions.

Who It Affects

• First-time home buyers in Alabama who may open a designated savings account, contribute funds, and receive tax deductions and tax-exempt earnings if funds are used for eligible costs.
• Financial institutions and the Alabama Department of Revenue, which would create, manage, report on, and enforce the accounts and penalties.

Key Provisions

• Establishes the Alabama First-time Home Buyer Savings Account Act and designates accounts at financial institutions for paying eligible costs on the purchase of a single-family home in Alabama.
• Provides a state income tax deduction for contributions: up to $6,000 per year for individual account holders or $12,000 per year for joint accounts, for up to five years, and excludes earnings from taxable income.
• Requires funds to be used only for eligible costs (down payment and allowable closing costs) for an Alabama home; funds not used for eligible costs trigger penalties.
• Withdrawal penalties include the entire account balance being added to taxable income and a 10% penalty on withdrawal for non-eligible costs, with exceptions (death, disability, bankruptcy) and a 60-day transfer rule to avoid penalties.
• Applies to Alabama residents purchasing a primary residence in Alabama; accounts can be opened starting January 1, 2019 and may be joint if filing a joint return; funds cannot be used for purchases outside Alabama.
• Administrative provisions require the Department of Revenue to adopt forms and require annual reporting, and financial institutions to provide annual statements and track designated accounts.
• If funds are not expended on eligible costs within the five-year period, the remaining funds become taxable income to the account holder.

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