Hawaii HB 1756: RELATING TO THE INDIVIDUAL HOUSING ACCOUNT PROGRAM.

Bill Text

HOUSE OF REPRESENTATIVES ~
THIRTY-THIRD LEGISLATURE, 2026 IN
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO THE INDIVIDUAL HOUSING ACCOUNT PROGRAM.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
1 SECTION 1. The legislature finds that the affordable
2 housing crisis continues to be one of the State’s most
3 significant and challenging social problems and is a critical
4 issue for many Hawaii residents. As the cost of housing
5 continues to rise, the State must assist residents in finding
6 methods of increasing the availability of homeownership. Saving
7 for a down-payment on a home loan continues to be a barrier for
8 many Hawaii residents with few programs available to assist in
9 this endeavor.
10 Contributions to the first—time home buyer savings account
11 will reduce taxable income. This incentivizes first time home
12 ownership through saving for a down payment and closing costs.
13 Accordingly, the purpose of this Act is to update the Individual
14 Housing Accounts statute by increasing the contribution levels
15 and maximum account levels to reflect current housing prices
16 more accurately.
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H.B.NO./7~c~
1 SECTION 2. Section 235-5.5, Hawaii Revised Statutes, is
2 amended to read as follows:
3 “~235-5.5 Individual housing accounts. (a) There shall
4 be allowed as a deduction from gross income the amount, not to
5 exceed [$5,000] $20,000, paid in cash during the taxable year by
6 an individual taxpayer to an individual housing account
7 established for the individual’s benefit to provide funding for
8 the purchase of the individual’s first principal residence. A
9 deduction not to exceed [$10,000] $40,000 shall be allowed for a
10 married couple filing a joint return. No deduction shall be
11 allowed on any amounts distributed less than three hundred
12 sixty-five days from the date on which a contribution is made to
13 the account. Any deduction claimed for a previous taxable year
14 for amounts distributed less than three hundred sixty-five days
15 from the date on which a contribution was made shall be
16 disallowed and the amount deducted shall be included in the
17 previous taxable year’s gross income and the tax reassessed.
18 The interest paid or accrued within the taxable year on the
19 account shall not be included in the individual’s gross income.
20 For purposes of this section, the term “first principal
21 residence” means a residential property purchased with the
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1 payment or distribution from the individual housing account
2 which shall be owned and occupied as the only home by an
3 individual who did not have any interest in, individually, or
4 whose spouse did not have any interest in, if the individual is
5 married, a residential property within the last five years of
6 opening the individual housing account.
7 In the case of a married couple filing separate returns,
8 the sum of the deductions allowable to each of them for the
9 taxable year shall not exceed [$5,000] $20,000, or [$10,000]
10 $40,000 for a joint return, for amounts paid in cash, excluding
11 interest paid or accrued thereon.
12 The amounts paid in cash allowable as a deduction under
13 this section to an individual for all taxable years shall not
14 exceed [$25,000] $200,000, excluding interest paid or accrued.
15 In the case of married individuals having separate individual
16 housing accounts, the sum of the separate accounts and the
17 deduction under this section shall not exceed [$25,000]
18 $200,000, excluding interest paid or accrued thereon.
19 (b) For purposes of this section, the term “individual
20 housing account” means a trust created or organized in Hawaii
21 for the exclusive benefit of an individual, or, in the case of a
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Page 4 H .B. No.~
1 married individual, for the exclusive benefit of the individual
2 and spouse jointly, but only if the written governing instrument
3 creating the trust meets the following requirements:
4 (1) Contributions shall not be accepted for the taxable
5 year in excess of [$5,000] $20,000 (or [$10,000]
6 $40,000 in the case of a joint return) or in excess of
7 [$25,000] $200,000 for all taxable years, exclusive of
8 interest paid or accrued;
9 (2) The trustee is a bank, a savings and loan association,
10 a credit union, or a depository financial services
11 loan company, chartered, licensed, or supervised under
12 federal or state law, whose accounts are insured by
13 the Federal Deposit Insurance Corporation, the
14 National Credit Union Administration, or any agency of
15 [thio] the State or any federal agency established for
16 the purpose of insuring accounts in these financial
17 institutions. The financial institution [must] shall
18 actively make residential real estate mortgage loans
19 in Hawaii;
20 (3) The assets of the trust shall be invested only in
21 fully insured savings or time deposits. Funds held in
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Page5 H.B.NO./7S~
1 the trust may be commingled f