First‐time Homebuyer Savings Accounts (FHSAs) are a great way for future homeowners to start saving early for the costs of buying a home.

An FHSA allows any Coloradan to set aside up to $50,000 toward the costs of closing on a new home. The earnings on those funds — interest and capital gains — are free from Colorado state taxes forever. What does that mean? Well, that means when you designate a savings account as an FHSA, you don’t have to pay state taxes for earnings on that money, although federal taxes still apply.

You can contribute up to $50,000 of post-tax money into the savings account. Over time, that principal will grow and earn interest. You won’t have to pay state taxes on interest and capital gains from the FHSA account, up to $150,000.

As long as you use that money towards the purchase of your first home, you won’t have to pay taxes. Eligible costs include almost anything related to buying a home, like closing costs, inspections, and lender fees.

These accounts are simple and easy to set up. Not only can you open a new one, you can also designate almost any existing account as an FHSA. To create an FHSA, you simply include a form when you file your state taxes. (It will indicate that you should not be taxed on any earnings — e.g., interest or capital gains — because of the account’s FHSA status.)

If you’re thinking of becoming a homeowner in the Denver area now or in the future, contact Metrowest – we have lots of valuable resources to help you along the way!