Nebraska savers could subtract taxes on first-home account deposits

Account holders could subtract eligible contributions and account earnings from Nebraska taxable income. The account must be held at a financial institution for a named first-time buyer’s eligible costs to buy or build a primary home in Nebraska. A first-time buyer generally has never owned an owner-occupied home, or has been off the title for at least three years after a marriage ends. The contribution subtraction is limited to $5,000 for an individual or $10,000 for married people filing jointly; eligible account earnings may also be subtracted. To qualify, account holders must follow the account rules and file the department’s form, the account’s 1099, and any required records with their yearly state tax return. Accounts could be opened beginning January 1, 2027. The subtraction would apply to tax years beginning on or after January 1, 2027.

Account holders would have to add back some tax benefits when money is withdrawn or the account holder dies. These rules apply to money in a designated first-time home buyer savings account, whether the account holder or another person is the named beneficiary. A withdrawal within one year of the first deposit, or money used for an unauthorized purpose, would be subject to recapture in that tax year. For unauthorized use, the penalty would be 5% of the recaptured amount if withdrawn within ten years of the first deposit, and 10% if withdrawn more than ten years later. No such penalty applies to eligible out-of-state home costs or if the beneficiary dies and no new beneficiary is named that tax year. If the account holder dies, previously subtracted amounts would be recaptured, but no penalty is due. Recapture and any penalty would apply in the tax year of the withdrawal or death, as specified.