The proposed bill introduces the "First-Time Homebuyer Savings Account Act" under Title 44 of the General Laws, establishing a framework for Rhode Island residents to create savings accounts specifically for purchasing their first home. The bill defines key terms such as "account holder," "eligible costs," and "qualified beneficiary," and outlines the responsibilities of account holders, including the requirement to submit detailed information regarding their accounts to the division of taxation.

It allows individuals to open a first-time homebuyer savings account with Rhode Island housing and designate the account for the purpose of paying or reimbursing eligible costs related to the purchase of a home in Rhode Island. Contributions to these accounts can only be made in cash and marketable securities, with no limit on the amount that can be deposited. However, there are limitations on the total principal amount that can be deducted and excluded from taxable income.

The bill provides tax benefits for account holders, allowing them to deduct contributions from their taxable income for Rhode Island income tax purposes, with annual deductions not exceeding $15,000 for individuals and $30,000 for those filing jointly. Additionally, earnings from the accounts are excluded from taxable income, subject to certain limitations. The total principal limit for deductions and exclusions is capped at $150,000 over a ten-year period.

The bill also imposes penalties for withdrawals made for purposes other than eligible costs, ensuring that the funds are used as intended. If funds are withdrawn for non-eligible costs, they will be included in the account holder's taxable income, and a penalty of 10% of the amount withdrawn will be applied, with certain exceptions. Overall, this legislation aims to facilitate homeownership for first-time buyers in Rhode Island by providing financial incentives and a structured savings approach.