Nebraska lawmakers have approved a plan aimed at helping residents save for their first home through tax-advantaged savings accounts, part of a broader package from the Legislature’s Revenue Committee.
The proposal, originally introduced as LB938 on behalf of State Treasurer Joey Spellerberg and later rolled into LB803, creates “first-time homebuyer savings accounts” that allow individuals to set aside money for home purchases while reducing their state tax liability.
Beginning in 2027, individuals will be able to open designated accounts at financial institutions and contribute up to $5,000 annually, or $10,000 for couples filing jointly, with lifetime contribution limits of $25,000 and $50,000, respectively. Contributions to the accounts will be state income tax deductible, and earnings will grow tax-free if used for qualified expenses such as down payments, closing costs, and certain fees associated with purchasing or building a primary residence.
“When Nebraskans buy or build a home in our state, they invest in their community,” Spellerberg said in a statement. “Homeownership is also critical to building long-term personal wealth.”
Under the law, a first-time homebuyer is defined as someone who has never owned a primary residence or has not been listed on a property title for at least three years following a divorce.
Also explained in the bill, funds withdrawn for nonqualified purposes, or within one year of opening an account, are subject to “recapture,” meaning the benefits are reversed and added back to taxable income. In some cases, additional penalties of 5% to 10% may apply depending on how long the account has been open.
Account holders are also responsible for maintaining documentation and filing annual reports with the state to verify how funds are used. Financial institutions are not required to track or report account activity beyond standard tax forms, placing compliance obligations on the individual. Funds generally must be used for a home purchase within Nebraska, with limited exceptions for military members.
The bill package has been sent to Gov. Jim Pillen for his signature. Read more on the measure from Treasurer Spellerberg at treasurer.nebraska.gov.