2026 -- S 2367

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LC004559

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     STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2026

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A N   A C T

RELATING TO TAXATION -- FIRST-TIME HOMEBUYER SAVINGS ACCOUNT ACT

     Introduced By: Senators Lawson, Tikoian, Ciccone, Murray, and LaMountain

     Date Introduced: January 30, 2026

     Referred To: Senate Finance

     It is enacted by the General Assembly as follows:

     SECTION 2. Title 44 of the General Laws entitled "TAXATION" is hereby amended by

adding thereto the following chapter:

CHAPTER 73

FIRST-TIME HOMEBUYER SAVINGS ACCOUNT ACT

     44-73-1. Short title.

     This chapter shall be known and may be cited as the "First-Time Homebuyer Savings

Account Act."

     44-73-2. Definitions.

     As used in this chapter:

     (1) "Account holder" means an individual who establishes, individually or jointly, with one

or more other individuals, a first-time homebuyer savings account.

     (2) "Allowable closing costs" means a disbursement listed on a settlement statement for

the purchase of a home in Rhode Island by a qualified beneficiary.

     (3) "Eligible costs" means the down payment and allowable closing costs for the purchase

of a home in Rhode Island by a qualified beneficiary.

     (4) "Financial institution" means any bank, trust company, mortgage lender, savings

institution, industrial loan association, consumer finance company, credit union, or any benefit

association, insurance company, safe deposit company, money market mutual fund, or similar

entity authorized to do business in Rhode Island.

     (5) "First-time homebuyer" means an individual who resides in Rhode Island and has not

owned or purchased, either individually or jointly, a home during a period of three (3) years prior

to the date of the purchase of a home.

     (6) "First-time homebuyer savings account" or "account" means an account with Rhode

Island housing that an account holder designates as a first-time home buyer savings account on the

account holder's Rhode Island income tax return, pursuant to this chapter for the purpose of paying

or reimbursing eligible costs for the purchase of a home in Rhode Island by a qualified beneficiary.

     (7) "Home" means a dwelling owned and occupied by a qualified beneficiary as the

qualified beneficiary's primary residence, which may include a single-family dwelling, multifamily

dwelling, manufactured home, trailer, mobile home, condominium unit, or cooperative.

     (8) "Qualified beneficiary" means a first-time homebuyer who is designated as the qualified

beneficiary of an account designated by the account holder as a first-time homebuyer savings

account.

     (9) "Settlement statement" means the statement of receipts and disbursements for a

transaction related to real estate, including a statement prescribed under the Real Estate Settlement

Procedures Act of 1974, 12 U.S.C. §§ 2601 through 2617, as amended, and regulations thereunder.

     44-73-3. Establishment of first-time homebuyer savings account.

     (a) The general treasurer, in conjunction with the division of taxation, secretary of the

Rhode Island department of housing, and executive director of Rhode Island housing, shall

establish, in any form as the general treasurer deems appropriate, a first-time homebuyer savings

program to allow Rhode Island residents to save money for the sole purpose of purchasing a first

home.

     (b) Designation and use of first-time home buyer savings account. Any individual may

open an account with Rhode Island housing and designate the account, in its entirety, as a first-time

homebuyer savings account to be used to pay a qualified beneficiary’s eligible costs for the

purchase of a home in Rhode Island.

     (c) Designation of qualified beneficiary. An account holder shall designate no later than

April 15 of the year following the tax year during which the account is established, a first-time

homebuyer as the qualified beneficiary of the first-time homebuyer savings account. The account

holder may designate themself as the qualified beneficiary and may change the designated qualified

beneficiary at any time, but there may not be more than one qualified beneficiary at any one time.

     (d) Joint account holders. An individual may jointly own a first-time homebuyer savings

account with another person if the joint account holders file a joint income tax return.

     (e) Qualified beneficiary of more than one account. An individual may be designated as

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the qualified beneficiary on more than one first-time homebuyer savings account.

     (f) Contributions to account. Only cash and marketable securities may be contributed to a

first-time homebuyer savings account. Subject to the limitations of § 44-73-5, persons other than

the account holder may contribute funds to a first-time homebuyer savings account. There is no

limitation on the amount of contributions that may be made to or retained in a first-time homebuyer

savings account.

     44-73-4. Account holder responsibilities.

     (a) The account holder:

     (1) Shall not use funds held in a first-time homebuyer savings account to pay expenses of

administering the account, except that a service fee may be deducted from the account by a financial

institution in which the account is held;

     (2) Shall submit to the division of taxation, with the account holder's state income tax return

on forms prepared by the division of taxation, detailed information regarding the first-time home

buyer savings account, including a list of transactions for the account during the tax year; and the

Form 1099 issued by Rhode Island housing for such account;

     (3) Shall submit to the division of taxation, upon a withdrawal of funds from a first-time

homebuyer savings account, a detailed account of the eligible costs toward which the account funds

were applied and a statement of the amount of funds remaining in the account, if any.

     (b) Transfer of funds. An account holder may withdraw funds, in whole or in part, from a

first-time homebuyer savings account and deposit the funds in a new first-time homebuyer savings

account held by a different financial institution.

     (c) The account holder shall use these funds to purchase a first-time home in Rhode Island

and shall only be eligible to use these funds for an out-of-state purchase upon relocation to another

state and provide documentation of residency.

     44-73-5. Deduction and exclusion from taxable income.

     (a) Deduction of contributions. Except as otherwise provided in this chapter and subject to

the limitations under this section, there shall be deducted from taxable income of an account holder

for Rhode Island income tax purposes the amount contributed to a first-time homebuyer savings

account during each tax year, subject to the limitations of subsection (b) of this section. There shall

be no limitation to the amount an account holder can deposit per year; provided, however, accounts

shall not exceed the limitations set forth in subsection (c) of this section. For taxable years

commencing on and after January 1, 2027, annual contributions and interest earned on a first-time

home buyer savings account may be deducted from the taxable income of the account holder.

Annual deductions shall not exceed fifteen thousand dollars ($15,000) per year for an individual or

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thirty thousand dollars ($30,000) per year for those filing jointly.

     (b) Exclusion of earnings. Except as otherwise provided in this chapter and subject to the

limitations under this section, there shall be excluded from taxable income of an account holder for

Rhode Island income tax purposes the amount of earnings, including interest and other income on

the principal, from the first-time homebuyer savings account during the tax year.

     (c) Limitations on deduction and exclusion from taxable income. An account holder may

claim the deduction and exclusion under this section:

     (1) For a period not to exceed ten (10) years;

     (2) For an aggregate total amount of principal, not to exceed one hundred fifty thousand

($150,000) dollars during that ten (10) year period; and

     (3) Only if the principal and earnings of the account remain in the account until a

withdrawal is made for eligible costs related to the purchase of a home by a qualified beneficiary,

except as otherwise provided in subsection (b) of this section.

     (d) Non-account holders. A person other than the account holder who deposits funds in a

first-time homebuyer savings account shall not be entitled to the deduction and exclusion provided

for under this chapter.

     (e) Remaining funds. Any funds in a first-time homebuyer savings account not expended

on eligible costs by December 31 of the last year of the ten (10) year period shall thereafter be

included in the account holder's taxable income.

     44-73-6. Penalty for withdrawal for purpose other than eligible costs.

     (a) Except as otherwise authorized by this chapter, if the account holder withdraws any

funds from a first-time homebuyer savings account for a purpose other than eligible costs for the

purchase of a home:

     (1) Those funds shall be included in the account holder's taxable income; and

     (2) The account holder shall pay a penalty to the division of taxation equal to ten percent

(10%) of the amount withdrawn. Such penalty shall not apply to funds withdrawn from an account

that were:

     (i) Withdrawn by reason of the account holder's death or disability; or

     (ii) A disbursement of assets of the account pursuant to a filing for protection under the

United States Bankruptcy Code, 11 U.S.C. §§ 101 through 1532.

     (b) Account holder relocates to another state may withdraw funds due from the account.

An account holder shall provide documentation to Rhode Island housing, prior to withdrawing, that

they are no longer a resident of the state.

     (c)(1) The division of taxation shall prepare forms for the designation of an account with a

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financial institution to serve as a first-time homebuyer savings account; and the designation of a

qualified beneficiary of a first-time home buyer savings account.

     (2) For an account holder to annually submit to the division of taxation detailed information

regarding the first-time homebuyer savings account including, but not limited to, a list of

transactions for the account during the tax year, and identifying any supporting documentation that

is required to be maintained by the account holder.

     SECTION 3. This act shall take effect upon passage.

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N   A C T

RELATING TO TAXATION -- FIRST-TIME HOMEBUYER SAVINGS ACCOUNT ACT

***

     This act would allow an individual, who is a first-time homebuyer, to contribute funds to

a first-time homebuyer savings account with Rhode Island housing to pay for eligible costs to

purchase a home and receive favorable tax deductions and exemptions.

     This act would take effect upon passage.

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