HB171 Alabama 2022 Session

Updated Feb 22, 2026

Summary

Primary Sponsor: Kyle South
Republican
Session: Regular Session 2022
Title: Home buyers, extend the ability to create a first-time and second chance home buyer savings account in banks or financial institutions, extend term of account, responsibilities further defined of account holders, Revenue Dept to report additional information, Secs. 24-11-5, 24-11-7, 24-11-10 am'd.
Summary: HB171 expands Alabama's first-time and second-chance home buyer savings accounts by extending deposits to ten years, clarifying account holder responsibilities, and adding reporting and tax-benefit provisions.
What This Bill Does
Extends the deposit period to ten years and allows deposits for the full term. Maintains a tax deduction for account holders (up to $5,000 per year for individuals or $10,000 for joint accounts) with aggregate limits of $25,000 for individuals or $50,000 for joint accounts over the period, and excludes earnings from Alabama income tax. Adds requirements for account holders to report detailed account information with tax returns and to provide a detailed cost accounting upon withdrawal, with penalties if not followed. Requires the Department of Revenue to report annual totals on deductions, deposits, and related account activity, and restricts use of funds to purchases of single-family homes in Alabama, with a sunset provision after 2028 unless extended.

Who It Affects
Account holders (individuals or joint) who open and fund a first-time or second-chance home buyer savings account; they would receive tax deductions and tax-excluded earnings but must follow reporting and withdrawal rules and use funds for eligible costs in Alabama.
The Alabama Department of Revenue and the banks/financial institutions that hold and administer these accounts; they must collect required information, issue forms, enforce rules, and report annual data.

Key Provisions
Extends the ability to create first-time and second-chance home buyer savings accounts and allows deposits for up to ten years.
Sets tax benefits: up to $5,000 deduction per year for individuals or $10,000 for joint accounts, with aggregate limits of $25,000 (individual) or $50,000 (joint) over the period; earnings are excluded from Alabama taxable income.
Account holders must submit detailed information with their Alabama tax return and provide the 1099 form; upon withdrawal, they must detail eligible costs and remaining funds, or face penalties on the entire account balance.
Funds must be used for eligible costs toward purchasing a single-family residence in Alabama; funds cannot be used to purchase a residence outside Alabama.
If funds are not expended by the end of the period, they become taxable income to the account holder.
Annual reporting by the Department of Revenue includes total deductions claimed, total deposits deducted, number of accounts submitted, and number of deductions not expended or subject to penalties.
The act terminates five years after the effective date for accounts not currently claiming the deduction, and no new accounts can be established after December 31, 2028 unless extended.

AI-generated summary using openai/gpt-5-nano on Feb 22, 2026. May contain errors — refer to the official bill text for accuracy.
Subjects: Home Buyers