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HB2787 would allow more dollars into individual housing accounts

The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Housing on Feb. 8, 2024.
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Feb. 8, 2024, 10 a.m.
Hawaii State Capitol
Conference Room 312 and Videoconference

To: House Committee on Housing
      Luke Evslin, Chair
      Micah Aiu, Vice-Chair

From: Grassroot Institute of Hawaii
           Ted Kefalas, Director of Strategic Campaigns

 COMMENTS IN SUPPORT OF HB2787 —RELATING TO THE INDIVIDUAL HOUSING ACCOUNT PROGRAM

Aloha Chair Evslin, Vice-Chair Aiu and Committee Members,

The Grassroot Institute of Hawaii would like to offer its support for HB2787, which would quadruple the amount of money that an individual or couple could add to their tax-deductible “individual housing account” under the state’s Individual Housing Account Program. The bill would also direct the state Department of Taxation to raise awareness about these accounts.

The Individual Housing Account Program lets prospective first-time homebuyers deduct a certain amount of money from their gross income for the purposes of saving for and buying a house. Whatever money they place in an individual housing account is not taxed when it enters the account.

For individuals, the current annual limit is $5,000, and for couples it’s $10,000. This bill would increase those annual limits to $20,000 and $40,000, respectively.

Likewise, the bill would increase the total amount of money that an individual or couple could deduct for all tax years — from $25,000 to $200,000.

Under current law, once a home is purchased, the homebuyer must pay income tax on the money they used from the housing account. Further, 10%  of that money is added to the homebuyer’s gross income for tax purposes for the next 10 years.

So, just to be clear, the program does not exempt money used to buy a home from the income tax, but it does offer prospective homebuyers an attractive way to save up for a down payment on the front end and repay their tax liabilities later on.

In any case, updating this clause is long overdue. These amounts have not been increased since the program was launched in 1982.[1]

Two years before, in 1980, the median home price in Honolulu was a mere $158,800.[2] With the median home price now hovering around $1 million, it is clear these figures should be increased significantly.

Thank you for the opportunity to testify.

Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1]OHA-6: HB1746/SB2135 Individual Housing Account Tax Incentives,” Office of Hawaiian Affairs, 2018, p. 1.
[2]The State of Hawaii Data Book 2000,” Hawaii Department of Business, Economic Development and Tourism, p. 462.

 

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