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House Bill 589 — First-time home buyer savings account

House Bill 589 — First-time home buyer savings account

Lindsay Atkinson
March 3, 2020

Bill description: HB 589 would allow individuals to save up to $15,000 per year tax-free, to put toward the cost of purchasing a home in Idaho. Married couples could save up to $30,000.

Rating: -1

Does it directly or indirectly create or increase any taxes, fees, or other assessments? Conversely, does it eliminate or reduce any taxes, fees, or other assessments?

HB 589 would allow individuals who are purchasing their first home to make up to $15,000 in pre-tax contributions to a savings account which they could then put toward the costs of purchasing a single family residence. A married couple could contribute up to $30,000 per year. 

Additionally, the total amount of both the yearly contribution and interest earned in this account could be deducted by an individual or married couple from their taxable income on their state income taxes. Which means an individual could receive up to a $15,000 deduction and a married couple could deduct up to $30,000.

The total contributions to a first-time home buyer savings account over the course of its lifetime could be up to $100,000.

In total, the tax cut from this legislation for Idahoans could be up to $1,947,528 per year.


Does it increase government redistribution of wealth? Examples include the use of tax policy or other incentives to reward specific interest groups, businesses, politicians, or government employees with special favors or perks; transfer payments; and hiring additional government employees. Conversely, does it decrease government redistribution of wealth?

The savings accounts established by this legislation would benefit just a handful of individuals in Idaho, at the expense of others. Based on the total estimated savings in the fiscal note, roughly 528 individuals and 792 married couples would be eligible to receive the full tax savings from these accounts. The limited number of individuals who are looking to purchase their first home would receive this tax break, while all other residents of the state would be forced to pick up the tab.

The legislation would define a first-time homebuyer as an individual or married couple “who resides in Idaho, who has filed an income tax return in Idaho for the most recent taxable year, and who does not own, either individually or jointly, a single-family or multifamily residence and who has never owned or purchased, either individually or jointly, a single-family residence in any location.” While this definition might work well for a young person who wants to purchase a home in Idaho, or a family that has just moved to Idaho, it wouldn’t work for many others, including:

  • Someone who owns a stake in some small investment properties in-state
  • A family that purchased a home in the past in Idaho, which it sold or lost to a foreclosure due to an economic downturn. Even though the family is renting and doesn’t own any home, since it purchased a home in the past, it would not be eligible to use one of these savings accounts
  • A young family living in a small one-bedroom home and looking to purchase a larger home for a child on the way
  • A married couple looking to purchase a duplex to move into, so that they can live on their own property while having the rent from one apartment cover part of their mortgage

Establishing a limited first-time homebuyers savings account would pick winners and losers by giving some individuals a tax break, while others would receive no such discount on their state income taxes. This could force some individuals to pay artificially higher effective tax rates as they would be paying for an increased share of public services. This legislation also would make it harder for the state to lower overall tax rates.


Does it transfer a function of the private sector to the government? Examples include government ownership or control of any providers of goods or services such as the Land Board’s purchase of a self-storage facility, mandatory emissions testing, or pre-kindergarten. Conversely, does it eliminate a function of government or return a function of government to the private sector?

HB 589 would reward Idahoans for purchasing a home, even when it might not otherwise be the best option for them. For example, a mobile family, such as one in the military, very well might be better off renting a home so as not to invest too heavily in one place without the certainty of sticking around long-term. Investing such a substantial portion of one's capital in a single location without any certainty of remaining there for the long term could be unwise.

However, the tax break this family could receive by putting money into a first-time homebuyer savings account might skew its decision toward purchasing a home. Rather than leaving it to individuals or families to determine whether it makes more sense in their particular situation to rent or own a home (or, perhaps, live on the road in a motorhome), HB 589 would give preferential treatment to homeownership over anything else.


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