To receive this tax treatment, an account holder must designate the account as a first-time home buyer savings account on his or her income tax return and may be required to submit supporting documents such as account statements and Form 1099-INT with the account holder’s income tax return. Qualified withdrawals may not be made until one year after the first-time home buyer savings account is opened and designated as a first-time home buyer savings account. Finally, for tax years 2022 and after, distributions that are qualified withdrawals, made to pay or reimburse for eligible costs, are deductible to the extent they are included in AGI. Interest earned on contributions to the account is also deductible for tax years 2022 and after to the extent not deducted in determining AGI. PA 5 amended the Michigan Income Tax Act to allow a deduction for contributions made in tax years 2022 through 2026 to a first-time home buyer savings account less qualified withdrawals made from the same account up to a total deduction of $5,000 on a single return or $10,000 for a jointly filed return, to the extent not deducted in determining adjusted gross income (AGI). An individual may, however, be designated as the qualified beneficiary on more than one first-time home buyer savings account. An individual may establish multiple first-time home buyer savings accounts but cannot designate the same qualified beneficiary on more than one account. The maximum account balance for an account is $50,000. The qualified beneficiary may be the account holder themself or another Michigan resident so long as the beneficiary has not owned or purchased a single-family residence during the three years prior to the date of purchase. Eligible costs include the down payment and other allowable closing costs as shown on a settlement statement or an executed sales agreement for the purchase of a traditional or manufactured home. Under PA 6, beginning January 1, 2022, through December 31, 2026, an individual may establish a first-time home buyer savings account for the purpose of paying or reimbursing for eligible costs of purchasing a single-family residence for use as a principal residence by a qualified beneficiary. This notice describes the program and the tax treatment of contributions to and withdrawals from these types of accounts. The program allows an individual to open a first-time home buyer savings account with any financial institution authorized to do business in Michigan, and allows for favorable state tax treatment for qualified contributions and withdrawals from these accounts. On February 9, 2022, Governor Gretchen Whitmer signed into law Public Acts 5 and 6 of 2022 (PAs 5 and 6), creating the Michigan First-Time Home Buyer Savings Program.
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