How To (Money): Individual Housing Account

*Read this only if you don't own your own house, apartment, condo, etc.*

This tip works in Hawaii and a few other states, and if you are fortunate enough to open one of these accounts, do it now. The account in referred to as the Individual Housing Account. Basically, the idea is simple. The state is willing to deduct up to $5000 off your gross income each year for up to $25,000 maximum, as long as all that money goes to the purchase of your first residence within 5 years of opening the account. Wait, what is that you say? The STATE is giving you money back because you are being a smart person by saving money for a place to live in? *GASP* Since you get taxed off of a smaller gross income, that $5000 goes in tax free for the purchase of your new house, and you owe the state less tax since they taxed off of your adjusted gross income. If that doesn't have you running to the nearest financial institution to open this account, I don't know what will.

Oh wait...there's MORE?! So I opened up my IHA at a bank here in Hawaii (not all banks offer this account). I was all excited that I was going to save money, and I would have a nice down payment for a new house within the next 5 years. Then they explained that I get interest on top of the amount I contribute to the account. Wait, so what the bank is saying is that they are going to GIVE ME MONEY because I'm SAVING MONEY? Yes, that's exactly what they are saying. True, the interest rate was about 3%, but it's FREE money. You actually get a double bonus because:

1. You get taxed off of a smaller gross income, so you pay less taxes to the state.
2. You get interest for the amount you put into the account (up to $5000 each year).

And what's better, is that if you are married, your spouse can do the same thing. What does that mean? That means if you and your spouse contribute the full $5000 each year, you will have a grand total of $50,000 to use in the purchase of your new residence. Not to mention each of you will get to deduct $25,000.

So where do you open this account? Call your nearnest bank, credit union, or loan company and ask for the account. The only person who will benefit from this will be you.