New to the state of Colorado, potential home buyers can set up a First-Time Home Buyer Savings Account (FHSA). Any Coloradan with money currently invested is able to reserve it as an FHSA towards their first purchase of a home in the future. Whether it be a mutual fund, CD, stocks or bonds, money markets, insurance, or just a savings account; you are now able to file a form with your taxes in order to preserve the money in the chosen account free of state tax, capital gain, and interest.
The only catch is you must be a first time home buyer. If you have purchased commercial property or land that does not count as the sale of residential space, nor does inheritance.
You can deposit up to a total of $50,000 in principal, and from there the account may grow in value up to $150,000. There is no time limit on how long the account can exist, however there is an annual contribution cap of $14,000 or $28,000 if filing jointly. The FHSA is valid only for the first time purchase of a home in the state of Colorado. If the FHSA money does not go towards an eligible cost, you will have to pay each year of taxes plus a 5% penalty on the amount of money you accumulated.
When the time comes, one may use the FHSA funds to pay for anything considered an “eligible cost” related to closing a home. These “eligible costs” include closing costs, inspections, lender fees, and anything included on the settlement statement. The funds can be dedicated to another person, such as a niece or nephew, child or grandchild, or even a friend. They must use it for an eligible cost and qualify as a first time home buyer. After the money is used, you file an additional form to the Department of Revenue that states the funds were used towards an eligible cost.
This is an amazing opportunity for the upcoming generation whom the majority will soon qualify as first time home buyers starting with the new and useful FHSA investment resource at their disposal.