The proposed bill introduces the "First-Time Homebuyer Savings Account Act" as a new chapter in Title 44 of the General Laws concerning taxation. This act allows individuals who are first-time homebuyers to establish a first-time homebuyer savings account with Rhode Island housing specifically for the purpose of saving money to cover eligible costs associated with purchasing a home in Rhode Island.

The bill defines key terms such as "account holder," "qualified beneficiary," "eligible costs," and "allowable closing costs." It outlines the responsibilities of account holders, including the requirement to submit detailed information regarding their accounts to the division of taxation, including a list of transactions and a Form 1099 issued by Rhode Island housing.

Additionally, the act provides tax benefits for contributions made to these savings accounts. Account holders can deduct contributions from their taxable income, with annual deductions capped at $15,000 for individuals and $30,000 for joint filers. The act also stipulates that earnings from the account are excluded from taxable income, subject to certain limitations, including a ten-year period for claiming deductions and exclusions, and a total principal limit of $150,000 during that period.

If funds are withdrawn for purposes other than eligible costs, a penalty will apply, which includes inclusion of the withdrawn amount in taxable income and a ten percent penalty on the amount withdrawn. The act is designed to encourage homeownership among first-time buyers in Rhode Island and will take effect upon passage.