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Virginia Association of Realtors
7/8/2014 9:39 AM

First-Time Homebuyer Savings Plans
A First-time Homebuyer Savings Plan allows any Virginian to set aside up to $50,000 toward the costs of closing on a new home. The earnings on those funds — interest and capital gains — are free from Virginia state taxes forever.

FHSPs are a great way for future homeowners to start saving early for the costs of buying a home. These accounts are simple and easy to set up. Not only can you open a new one, you can also designate almost any existing account as an FHSP. To create an FHSP, you simply include a form when you file your
state taxes. (It will indicate that you should not be taxed on any earnings — e.g., interest or capital gains — because of the account’s FHSP status.)After you use the money toward the closing costs on a first home (yours or someone else’s — see below),
you send in a different form to the Department of Taxation showing that the funds were put toward an “eligible cost.”

Q: What kinds of accounts can be FHSPs?
A: Almost any account you have with a financial institution: mutual funds, CDs, brokerage (stocks, bonds,etc.), money markets, insurance, even a savings account. FHSPs can also include individual stocks.

Q: How much can I put in a FHSP account?
A: You can contribute up to a total of $50,000 in principal, and the account can grow in value up to $150,000. You can put that $50,000 in all at once, or you can contribute over the years. There is no
limit on how long the account can exist.

Q: What can I use the money for?
A: A FHSP account can be used to pay for just about anything related to closing on a home — anything included on the settlement statement: closing costs, inspections, lender fees, etc. These are all considered “eligible costs.”

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