A person can establish a first-time home buyer savings account to reduce the cost of purchasing their first single-family home in Montana.
- You may exclude up to $3,000 of your contribution each year ($6,000 for those married, filing jointly) for up to 10 years.
- Withdrawals and Earnings
- Interest and other income earned on the account are not taxable to you if you withdraw them to pay for eligible expenses.
Any individual who is a resident of Montana and who has never owned or purchased a single-family residence in Montana or out-of-state.
Examples of eligible expenses include:
- Down payment
- Closing costs
- Realtor’s fees
- Appraisal costs
- Credit history report
- Pro-rated property taxes
- Home inspections
- Loan origination fees
Recapture Tax and Penalties
- Recapture of non-qualified withdrawals
- If you withdraw funds from the account for any purpose other than paying eligible expenses for the purchase of a single-family home in Montana, these funds are taxed as ordinary income. The recapturable amount must be reported on Form 2, Schedule I.
- Recapture after 10 years or when you move out of state
- Any principal, interest, or other earnings accumulated on the account and not used within 10 years of opening the account, must be reported as ordinary income on Form 2, Schedule I of the tax year the 10 year period ends.
- The same rule applies when you move out of state. The ordinary income must be reported on the last tax return you file as a Montana resident or part-year resident.
- Any recapture is subject to a 10% penalty, unless you withdraw funds on the last business day of the year. You must report the penalty on the “Other Penalties” line of Form 2.
- For further instructions on the Montana first-time home buyer savings account, see Montana First-Time Home Buyer Savings Account (Form FTB).
- Montana First-Time Home Buyer Savings Account (Form FTB) needs to be included each year with the account holder’s individual income tax return.
- The excluded contributions and earnings must be reported on Schedule II – Montana Subtractions from Federal Adjusted Gross Income (Form 2, Schedule II).