LEGISLATIVE FISCAL ESTIMATE
[First Reprint]
SENATE, No. 1391
STATE OF NEW JERSEY
221st LEGISLATURE
DATED: SEPTEMBER 24, 2025
SUMMARY
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Synopsis: |
Establishes New Jersey First-Time Home Buyer Savings Account Program; provides gross income tax benefits for certain contributions to and earnings on assets maintained in accounts established under program. |
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Type of Impact: |
Indeterminate impact on State finances. |
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Agencies Affected: |
New Jersey Housing and Mortgage Finance Agency and the Department of the Treasury. |
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Fiscal Impact |
FY 2026 & Thereafter |
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State Finances Impact |
Indeterminate |
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· The Office of Legislative Services (OLS) estimates that the bill would have an indeterminate impact on State finances. The OLS is unable to predict the magnitude of annual revenue losses because the fiscal impact is dependent on program participation and taxpayer behavior.
· The State may incur gross income tax revenue losses from two sources: (1) a tax credit of five percent of contributions to first-time home buyer savings accounts, up to $750 per taxpayer annually, with unused credits carrying forward up to seven years; and (2) the exclusion from gross income taxation of earnings on assets maintained in these accounts when withdrawn for authorized purposes.
· The gross income tax revenue loss from tax-exempt earnings will occur only to the extent that the investment returns would have been taxable absent these accounts. Investment income that would not otherwise exist does not constitute a revenue loss. Non-qualified withdrawals of earnings or credited contributions will be subject to income tax plus a 10 percent penalty, which may partially offset some State gross income tax revenue losses.
· The OLS finds the New Jersey Housing and Mortgage Finance Agency would experience an indeterminate increase in expenditures for the administration of the New Jersey First-Time Home Buyer Savings Account Program.
BILL DESCRIPTION
The bill establishes the New Jersey First-Time Home Buyer Savings Account Program to be administered by the agency. Certified first-time home buyers may open special savings accounts with participating financial institutions and contribute up to $15,000 (or $7,500 if married filing separately) annually, with a $75,000 lifetime limit on contributions and account values capped at $150,000. The bill provides a five percent gross income tax credit on annual contributions, up to $750 per taxpayer ($375 for married filing separately), with unused credits carrying forward up to seven years.
Account earnings grow tax-free and qualified withdrawals for home purchases are not subject to gross income tax. Eligible expenses include down payments and closing costs such as appraisal fees, mortgage origination fees, and inspection fees. Non-qualified withdrawals are subject to income tax on earnings and credited contributions, plus a ten percent penalty. Qualifying individuals must, among other requirements, have annual gross income not exceeding $175,000 for the past three years, not have owned a principal residence in that period, and have completed an approved home buyer education course.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS concludes that this bill will result in an indeterminate annual State revenue loss associated with the provision of gross income tax credits for qualified contributions to a first-time home buyer savings account and the gross income tax exclusion for certain earnings in these accounts. The OLS is unable to predict the magnitude of annual revenue losses because the fiscal impact is dependent on program participation and taxpayer behavior.
The actual annual gross income tax revenue loss will depend on several factors, including: the number of individuals who meet all eligibility requirements; the average contribution amounts relative to the $15,000 annual maximum; investment performance and resulting account earnings; the timing of home purchases and qualified withdrawals; the frequency of non-qualified withdrawals generating penalty revenue; and the utilization of the seven-year credit carryforward provision.
However, the gross income tax revenue impact associated with the gross income tax exclusion on account earnings presents additional uncertainty. The State revenue loss applies only to investment returns that would have existed and been taxable without these accounts. Moreover, to the extent that the accounts incentivize new savings behavior rather than redirecting existing investments, the gross income tax revenue loss would be lower than otherwise anticipated. However, distinguishing between these scenarios is challenging without empirical data on taxpayer savings patterns.
The agency will incur administrative costs for program implementation, including systems for processing certifications, maintaining financial institution agreements, and coordinating annual reporting with the Division of Taxation. These costs are also indeterminate and will scale with program participation. The overall fiscal impact will ultimately depend on market conditions, housing affordability trends, and taxpayer response to the incentives.
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Section: |
Revenue, Finance, and Appropriations |
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Analyst: |
Associate Fiscal Analyst |
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Approved: |
Thomas Koenig Legislative Budget and Finance Officer |
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).