A person can establish a first-time home buyer savings account to reduce the cost of purchasing their first single-family home in Montana.

Benefit

Deposits
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.

Eligibility

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.

Qualified Expenses

Examples of eligible expenses include:

  • Down payment
  • Closing costs
  • Realtor’s fees
  • Appraisal costs
  • Credit history report
  • Points
  • Pro-rated property taxes
  • Home inspections
  • Loan origination fees

You must use the funds in your account to pay for eligible expenses within 10 years of opening the account.

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.
Penalty
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).

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