The Illinois Homebuyer Savings Accounts Act aims to make the American Dream of homeownership a reality for everyone.

As housing supply across the state has continued to shrink and demand has increased, it is becoming harder and harder to achieve this aspect of the American Dream. Those who have worked relentlessly to save for their first home often find themselves unable to save enough to counter the ever-increasing prices of a home. With this legislation, homebuyers will now have a leg up in the process.

The Illinois Homebuyer Savings Accounts Act quite simply incentivizes and creates a tax advantage for saving for a home. Illinois previously had a program that tried to accomplish this goal, but it was unfavorable, and regulators insisted that the program be discontinued. This new Act, simplifies the process and provides:

• Eligible first-time and second-chance homebuyers may create designated savings accounts and receive a tax deduction of up to $5,000 (for single filers) or $10,000 (for married/joint filers) per year for contributions to that account.
  • Funds deposited in the designated savings accounts may only be used toward a down payment or eligible closing costs for purchasing a single-family home in Illinois.
  •  Just like health savings accounts or a “529” college savings plan, a penalty is imposed for a withdrawal that does not go towards eligible expenses.
• Tax deductions are capped over the lifetime of the account at $25,000 for single filers and
  $50,000 for joint filers.
• The Illinois Department of Revenue will create forms on which contributions to the designated savings accounts can be reported with annual tax returns.
  • Financial institutions and the Department of Revenue have a much smaller administrative role than in the prior program.
  • Eligible first-time and second-chance homebuyers’ compliance subject to audit by the Department.