With housing affordability becoming an increasing concern, two new bills recently signed into law may give hopeful home buyers a boost by helping them save money in advance. 

On February 9, Gov. Gretchen Whitmer signed House Bill 4290 and Senate Bill 145, creating the Michigan First-Time Home Buyer Savings Account Program in the Department of Treasury. The bills were sponsored by Rep. Mari Manoogian, D-Birmingham, and Sen. Ken Horn, R-Frankenmuth. 

Under the new law, first-time home buyers are able “to open an account with a financial institution and designate the account as a first-time home buyer savings account to be used to pay or reimburse a beneficiary's eligible costs for the purchase of a single-family residence in the State.” 

First-time home buyers and family members can contribute and withdraw from the account tax-free and claim up to $5,000 for a single return or $10,000 for a joint return on their annual state income taxes. Any associated interest accrued is also tax exempt, so long as it is used for a first-time home purchase. The account has a contribution cap of $50,000, although interest may continue to accrue.

In a press release issued by the state, Gov. Whitmer said, “Homeownership creates opportunity for Michigan families and sets a foundation for economic success. I am proud to sign this legislation which will put Michiganders first by helping families save for and purchase homes.”

The bill has been met with praise from real estate industry leaders, including James Iodice, 2022 Michigan Realtors® president, who said, “These accounts will help individuals and families achieve the dream of homeownership, retain our talented college graduates, and promote financial literacy and smart savings.” Iodice added that, “Realtors® are very excited to work as ambassadors for this new program. We are thankful to Governor Whitmer, as well as Representative Manoogian and Senator Horn for their leadership on this important issue.”

The bills’ sponsors say the goal is to give young Michigan residents a leg up in the real estate market and keep them here in the state.

Rep. Manoogian said, "This new program will put young people and new families on the pathway to success and will help our state retain its best and brightest, allowing people to stay here in our communities to raise the next generation of Michiganders.” 

Sen. Horn added, "Buying a house is hard, especially in today's economy. We know the importance of homeownership in establishing vibrant communities and in retaining and attracting talented young people to Michigan." 

In a press release announcing the new law, Michigan Realtors® shed light on some details of the bill, explaining that, “The definition of financial institution is very broad, including both interest bearing savings accounts and brokerage accounts, providing account holders with the necessary freedom to find the savings vehicle that is right for them.” The Association also clarifies the term “first-time home buyer,” defining it as “an individual who is a resident of this state and has not owned or purchased, either individually or jointly, a single-family residence during a period of 3 years prior to the date of the purchase of a single-family residence.” 

The Department of Treasury is responsible for overseeing the first-time home buyer savings program. Accounts may be created until the end of 2026, and deductions for contributions may be claimed for tax years 2022-2026. 

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