Read Full Article here… lifehacker.com

Photo: Monkey Business Images (Shutterstock) If you’re planning on buying a home in the next few years, you might consider parking your down payment in a First-Time Home Buyer Savings Account (FHSA). A few states currently sponsor FHSAs, and they’re different from basic savings accounts in that they can save you thousands of dollars in tax deductions. However, they come with restrictions on contributions and the money in these accounts must be used to purchase a home, so you have to be pretty darn sure you’re going to buy a home. Here’s a look at whether these accounts are worthwhile. What is an FHSA? To encourage home ownership—particularly for younger people struggling to pay off student loans—some states offer savings accounts that must be used for homebuying expenses. The benefit is that a certain amount of your total contributions for a given year can be deducted from your taxable income. The tax-deductible portion of your contributions varies by state, but it’s typically around $2,500-$5,000 (you’ll pay taxes on contributions that exceed that amount, however). However, the funds in this account have to be used to purchase a home in the state sponsoring the account, otherwise there’s a penalty on withdrawals—it’s sort of like a 529 plan for homes. Currently, only Alabama, Colorado, Idaho, Minnesota, Mississippi, Montana, Oregon and Virginia offer FHSAs, although legislation is either planned or under discussion in Louisiana, Massachusetts, Michigan, Missouri, Nebraska, New Jersey, New York, and Pennsylvania. The potential tax savings vary quite a bit […]