As the holiday season approaches, you might be considering a lasting, meaningful gift for a family member or loved one.

As the holiday season approaches, you might be considering a lasting, meaningful gift for a family member or loved one.

Duane Duggan

Duane Duggan, Realtor and Author RE/MAX of Boulder

As the holiday season approaches, you might be considering a lasting, meaningful gift for a family member or loved one. In 2023, you have the opportunity to give up to $17,000 without grappling with gift tax implications. What’s more, you’re permitted to make multiple $17,000 gifts to as many individuals as you wish. For instance, if you’re inclined to gift each of your three children $17,000, totaling $51,000, you can do so without incurring any gift tax. Should you opt for such a generous gift, you could assist the recipient in purchasing their first home through Colorado’s First-Time Homebuyer Savings Account (FHSA). Much like the well-known 529 college savings accounts, this plan allows any Colorado resident to establish an account specifically geared toward covering the down payment and other costs associated with buying a home.

For many first-time homebuyers, the primary obstacle to home buying often revolves around the lack of a sufficient down payment. A FHSA presents an excellent solution to this challenge, providing a viable avenue toward overcoming this hurdle.

Since 2017, aspiring first-time homebuyers in Colorado have had the opportunity to apply for a down payment savings account, as endorsed by the Colorado State Legislature through House Bill 16-1467.

What is the benefit of setting up the FHSA?
Establishing this account not only offers the advantage of tax-free growth on your down payment’s gains in Colorado but also introduces an automated monthly contribution system, ensuring progress towards your home purchase. This isn’t just a small perk; it’s a significant benefit for first-time homeowners. Consider it as an excellent holiday gift or a unique wedding present. Instead of traditional items like fine china that may seldom be used, why not contribute to the couple’s first home down payment? Moreover, welcoming a new member into the family opens opportunities for proud parents, grandparents, or friends to create a FHSA for the newborn, providing a future nest egg for their eventual home purchase as adults.

How much can be added to a FHSA?
You can contribute a total of $50,000 in principal. The account can grow to a peak of $150,000 free of Colorado taxes. There is an annual contribution cap of $14,000 for a single person or $28,000 for a married couple filing jointly. Best of all, there isn’t a time limit on how long the account can stay open.

What is allowable to be paid from the FHSA?
First and foremost, a down payment. However, funds from this account can also be applied to anything included on the settlement statement such as closing costs, inspections and lender fees.  

How is a first-time homebuyer defined in order to qualify for an FHSA?
Obviously, it is someone who has never owned a home, but there are exceptions. If you were married, owned a home, and are now divorced for three years, you still qualify. If you were fortunate to inherit a home, you can still qualify, but you probably wouldn’t need to save for a down payment in that case. Finally, another way to qualify is that you can buy a home with someone who has owned a home in the past, just as long as you have not owned a home before.

How do you, or someone wishing to help you, set up your FHSA?
Almost any kind of account you have at a financial institution can be designated as a FHSA. Examples are savings accounts, money market accounts, CDs, stocks, bonds, mutual funds and even insurance.  

If you are just getting started, you can open a new account or you can designate an existing account to become your FHSA. Speak to your financial advisors or banking specialists to give you advice and take that first step.

How do I create an account for the State of Colorado?
When you file your state income taxes there will be a form to fill out along with your State Income Tax return. If you have your taxes completed by an accountant, remind them of this important financial account and the proper forms necessary.

What do I do when I have bought a house and used the funds?
Congratulations on buying that home! There will be a form to fill out which you send to the State of Colorado showing that the funds were used toward “eligible” costs.

Do I have to use a loan program in conjunction with my FHSA?
You can use any FHA, CHFA, VA or conventional program. In fact, there are loan programs geared toward the first-time buyer. For example, with FHA you can apply for a low 3.5% down payment. Why not create a plan for monthly contributions to your FHSA based on saving up that 3.5% down payment by a certain time? Before you know it, you will have saved up enough to buy a home.

Be sure to consult your financial planner, accountant, mortgage loan officer and Realtor to create a plan that is just right for you.

By Duane Duggan. Duane graduated with a business degree and a major in real estate from the University of Colorado in 1978. He has been a Realtor® in Boulder since that time. He joined RE/MAX of Boulder in 1982 and has facilitated over 2,500 transactions over his career. Living the life of a Realtor and being immersed in real estate led to the inception of his book, Realtor for Life. For questions, e-mail [email protected], call 303.441.5611 or visit