Payments to an Individual Housing Account
You may be able to deduct from your gross income up to $5,000 paid in cash during the taxable year into a trust account which is established for saving for a down payment on your first principal residence. A deduction not to exceed $10,000 shall be allowed for a married couple filing a joint return. No deduction shall be allowed on any amounts distributed less than 365 days from the date on which a contribution is made to the account.
Any deduction claimed for a previous taxable year for amounts distributed less than 365 days from the date on which a contribution was made shall be disallowed and the amount deducted shall be included in the previous taxable year’s gross income and the tax reassessed.
The account is to encourage first-time home buyers to save money for a down payment on a home. The “first principal residence” means a residential property purchased with the payment or distribution from the individual housing account which shall be owned and occupied as the only home by an individual who did not have any previous interest in, individually, or if the individual is married, whose spouse did not own any interest in a residential property inside or outside of Hawaii within the last 5 years prior to opening the IHA. The amounts paid in cash allowable as a deduction for all taxable years are limited to $25,000, in the aggregate, excluding interest earned or accrued. This limitation also applies to married individuals having separate accounts; the sum of such separate accounts and the deduction shall not exceed $25,000 in the aggregate, excluding interest income earned or accrued.
For more information, see section 18-235- 5.5, Hawaii Administrative Rules.