A new state law establishes a new income tax credit for individuals and couples saving for their first home.
The new law applies to deposits in savings accounts Iowans use exclusively to set aside money to cover the costs of buying their first home. Individuals may claim a yearly credit of up to $2000. Couples saving for their first home could get a yearly $4000 tax break.
Republican Roby Smith of Davenport guided the proposal through the Iowa Senate last month.
“This helps Iowans with their pursuit of the American Dream…This is economic development,” Smith said during senate debate. “It helps home builders. It helps lumber yards,” Smith said. “It helps small businesses.”
The bill easily cleared the legislature, but there was one “no” vote in the Senate. In the House, 11 Democrats voted against it. Representative Mary Mascher, a Democrat from Iowa City, said the state already forgive more than $400 million in taxes this year because of already-existing tax credits.
“Giving tax breaks is a lot more fun that taking them away,” Mascher said during debate in the Iowa House, “but until lawmakers get serious about demanding hard evidence that a given tax break creates growth, state budgets will continue to run in the red.”
Representative Charlie McConkey of Council Bluffs was among the majority of Democrats who voted for the bill.
“I think we all can remember our first purchase,” McConkey said during House debate, “how tough it was to come up with the down payment on that.”
Governor Branstad approved the bill creating this new tax credit yesterday. Iowans will be able to start claiming the income tax credit for savings deposits made after January 1, 2018.