On Feb. 9, 2022, Michigan Governor Gretchen Whitmer signed a bill amending the Michigan Income Tax Act to allow for a tax deduction for contributions to first-time homebuyer savings accounts. Beginning Jan. 1, 2022, through Dec. 31, 2026, individuals can reap new tax benefits when contributing to these accounts before purchasing their first home.

The state will now allow annual income tax deductions for all of the following:

  1. Contributions to a first-time homebuyer savings account up to $5,000 ($10,000 for a joint return) each year
  2. Interest earned on contributions made to the account
  3. Qualified withdrawals from the account for the benefit of a first-time homebuyer

An individual is considered the designated beneficiary of a first-time homebuyer savings account if they are a Michigan resident and have not owned or purchased a single-family home within three years of the purchase date of the new single-family home (whether solely or jointly). In the event a withdrawal is determined as nonqualified, the individual will need to add the withdrawn amount back into their adjusted gross income.

If you have questions about the first-time homebuyer savings program, Doeren Mayhew’s individual tax advisors are here to help. Contact us today to learn more.