The Illinois General Assembly is considering a new bill aimed at making homeownership more accessible for first-time and “second-chance” home buyers in the state. 

Senate Bill 148, introduced by Senator Cristina Castro (D-22), proposes the creation of the “Illinois Home Buyer Savings Accounts Act,” which would offer tax-advantaged savings accounts to those looking to purchase a single-family residence in Illinois.

The bill defines a “first-time and second-chance home buyer” as an Illinois resident who has not owned or purchased a single-family residence in the past 10 years. This definition aims to assist not only those entering the housing market for the first time but also individuals who may have experienced financial hardship in the past and are now looking to re-enter homeownership.

Key Provisions of the Illinois Home Buyer Savings Accounts Act

• Tax Deductions and Exclusions: Account holders could deduct contributions to the savings account from their state income taxes, up to $5,000 for individual filers and $10,000 for joint filers. Earnings on the account, including interest, would also be excluded from taxable income.
• Contribution and Account Limits: The deduction and exclusion benefits could be claimed for up to 10 years, with a maximum aggregate contribution and earnings amount of $25,000 for individual accounts and $50,000 for joint accounts.
• Eligible Costs: Funds from the savings account can only be used for down payments and allowable closing costs associated with purchasing a single-family residence in Illinois. This includes manufactured homes, trailers, mobile homes, condominium units, and cooperatives.
• Joint Accounts: Two first-time and second-chance home buyers can jointly own an account, provided they file a joint income tax return.
• Penalties for Non-Eligible Use: If funds are withdrawn for purposes other than eligible housing costs, the entire balance will be included in the account holder’s taxable income, and a 10% penalty will be assessed. Exceptions are made for withdrawals due to death, disability, unemployment (after exhaustion of benefits), or bankruptcy.
• Financial Institution Responsibilities: Financial institutions are responsible for designating new accounts as “first-time and second-chance home buyer’s savings accounts” and providing yearly account statements. However, they are not required to track the use of withdrawn funds or ensure the account meets eligibility requirements.
• Department of Revenue Oversight: The Illinois Department of Revenue (Department) will adopt forms for account designation and annual reporting. The Department will also provide an annual report to the General Assembly, detailing the number of deductions claimed, the total amount of deposits deducted, and the number of taxpayers subject to penalties.

Andrew S. Chesney (R-45) became a co-sponsor of the bill on Feb. 13.