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Committee advances bill to create first-time homebuyer savings account with tax break
Summary
The Senate Insurance Committee recommended reporting SB 7-25 to the full Senate. The bill would let West Virginians open first-time homebuyer savings accounts with up to $5,000 per person per year excluded from state taxable income, subject to income phase-outs and a 10-year, $50,000 aggregate cap on exempt balances.
The Senate Insurance Committee voted to report Senate Bill 7-25, the First-Time Homebuyer Savings Account Act, to the full Senate with a recommendation that it pass and an initial referral to the Finance Committee. Counsel explained the measure and senators asked questions about eligibility and timing.
The bill would permit individuals who have been domiciled in West Virginia for at least six months and who have not owned a single-family residence in the previous three years to establish a first-time homebuyer savings account at a financial institution. Up to $5,000 per person per tax year may be subtracted from federal adjusted gross income for funds contributed to such an account; funds and earnings would be exempt from state taxation until withdrawn. The tax benefit is limited to a 10-year period with an aggregate principal-and-earnings cap of $50,000, and the bill phases out the exemption for taxpayers with federal adjusted gross income of $200,000 or more for joint filers and $100,000 or more for other filers.
Counsel (S3) told the committee the bill "defines various terms" and "provides that up to $5,000 per person may be subtracted from federal adjusted gross income for funds contributed to an account holder's first time home buyer savings account per tax year." The senator from Marion (S4) asked whether there is a required waiting period between contributing funds and using them; counsel replied there is no deposit-waiting-period specified in the bill. Counsel also confirmed there is no explicit overall account cap aside from the tax-benefit limitations. Counsel noted the bill applies to tax years beginning in 2026 through 2031 and that funds contributed before Jan. 1, 2030, would continue to enjoy the exemption for the term granted under the article.
The bill imposes penalties for ineligible withdrawals: funds used for nonqualifying purposes would be included in taxable income and subject to a penalty equal to 10% of the amount withdrawn unless the withdrawal resulted from the account holder's death, disability, bankruptcy, or transfer to a similar account at another institution. Counsel said the bill requires rulemaking by the tax commissioner and carries a fiscal note from the Tax and Revenue office that the Finance Committee should examine, as it identified inconsistencies and uncertainties.
Senator from Pleasance (S5) urged passage on affordability grounds, saying the measure is a vehicle to encourage homeownership and ‘‘help support the middle class.’’ The committee approved the motion to report the bill by voice vote; the Finance Committee will review the fiscal details next.
What happens next: SB 7-25 will be referred to the Finance Committee per the committee’s double-reference practice and then returned to the full Senate for further consideration.
