Nebraska Created a First-Time Homebuyer Savings Account...

Angela Peters, The Home Girl, Keeping It... Real Estate!

On Tuesday, I talked about Nebraska's housing problem, and why we need to spend far more time talking about homeownership, not just the number of housing units we can build. Today, one of the new tools Nebraska is putting on the buyer side of that equation.

Beginning January 1, 2027, Nebraskans will be able to open a First-Time Homebuyer Savings Account and receive state income-tax benefits while saving toward the purchase or construction of a first home.

It was created under LB 803, which passed the Nebraska Legislature 48 to 1 (come on Merv Riepe) and was signed into law in April 2026.

What Exactly Is a First-Time Homebuyer Savings Account?

Starting January 1, 2027, you may designate an account at a qualifying bank, credit union or other eligible financial institution as a Nebraska First-Time Homebuyer Savings Account.

The account is used to save toward eligible expenses tied to purchasing or building a primary residence in Nebraska, including the down payment, closing costs, appraisal fees, mortgage origination fees, inspection fees, and certain financing costs for new construction.

Now, the Tax Benefit

This is a Nebraska state income-tax benefit, not a federal deduction. Beginning in 2027, qualifying contributions reduce the income used to calculate your Nebraska state income tax.

An individual can contribute up to $5,000 per year, with a lifetime limit of $25,000. For married couples filing jointly, the annual limit is $10,000, with a lifetime limit of $50,000.

The account can also earn money. Interest and other earnings can receive favorable Nebraska tax treatment as well, as long as the account stays in compliance.

Clarification: Nebraska is not setting the interest rate. This is not a state-run product paying a government-determined return. You are opening an account with a financial institution, so if one bank pays 1% and a credit union down the street pays considerably more, that is worth noticing. The tax treatment comes from Nebraska. The interest rate comes from your financial institution. Shop accordingly.

So Where Does Nebraska Put Your Money?

Nebraska never takes possession of it. The money stays in the account you opened at your bank, credit union, or other qualifying institution. The State is not pooling deposits, borrowing your money, or investing the account on your behalf.

What Nebraska is giving up is tax revenue. Essentially, the State is saying: save intentionally toward homeownership here, and we will tax a little less of your income while you do it.

The State Treasurer describes the program as a way to encourage younger Nebraskans to save earlier and put down roots in the state, and from an economic-development standpoint, that reasoning holds up. A person who buys a home hires an inspector, an appraiser, a lender, movers, contractors, painters, landscapers. They buy furniture and appliances. They pay property taxes. And they begin building equity. Nebraska is sacrificing some tax revenue now in hopes of creating more economic activity, and more long-term residents, later.

Parents and Grandparents, Pay Attention

The person contributing to the account does not have to be the person buying the home. The account holder designates a qualified first-time buyer as the beneficiary, and that beneficiary can be someone else entirely. 

So Mom could open an account for you. Grandma could open another. This becomes a genuinely useful family wealth-building tool. Instead of telling your twenty-something child to start saving for a house, you could help build the mechanism that gets them started. The account holder can also change the beneficiary later if circumstances change.

Who Qualifies as a "First-Time" Buyer?

DUH someone who has never owned a single-family owner-occupied primary residence, including qualifying condominiums and manufactured or mobile homes taxed as real property.

But What if I Decide, "Forget the House, I Am Buying a Boat"?

Then Nebraska wants its tax benefit back. If funds are withdrawn for something outside the law's purposes, the tax advantage is subject to recapture, meaning the amount that previously reduced your taxable income gets added back, and a penalty may apply.

For a nonqualified withdrawal made ten years or less after the first deposit, the penalty is 5% of the recaptured amount. After ten years, it rises to 10%, with specific exceptions written into the law.

One More Rule

Do not open one of these accounts two weeks before closing and assume you found a loophole. If money is withdrawn less than one year after the first deposit, it is subject to recapture. Nebraska wants people to actually save, not pass money through at the last minute.

If homeownership is on your radar for 2027, talk to your tax professional before you write an offer.

And Yes, There Is Paperwork

The account holder is responsible for the records. The Department of Revenue will require an annual form with your state tax return, along with the account's 1099 and any supporting documentation required.

Your bank is not responsible for deciding whether you qualify, and it is not responsible for making sure you spend the money correctly. You are. Keep the paperwork. Your future self, and your CPA, will thank you.

Will This Solve Nebraska's Housing-Affordability Problem?

Of course not. Depositing another $5,000 into a tax-advantaged account does not create a $225,000 starter home where one does not already exist.

That is why the conversation about We Make Omaha, land use, development costs, missing-middle housing and actual homeownership inventory matters just as much. Helping people save is only half the equation. We also need homes they can afford to own. This account addresses the first piece. Federal housing policy, Nebraska development policy, local zoning and Omaha's comprehensive plan affect the second. There is no single fix. This is one lever among several.

Is It Worth Doing?

Absolutely yes it is worth looking at. The money stays yours and can earn interest. Contributions may reduce your state tax bill, and the earnings may grow tax-favored as well. 

Nebraska is essentially saying: keep your money, save it intentionally, and we will take a little less in state tax if those savings eventually help you put down roots here. If you have a child or grandchild who keeps saying "someday I want to buy a house," January 1 might be a good day to turn someday into an actual savings account.

More to come in the next blog....

Angela Peters | The Home Girl, Keeping It... Real Estate 402.215.1529 | angela@thehomegirlne.com | NE 20110578 IA S73434000 REALTOR® | Realty ONE Group Sterling

This article is for general real estate information and education and should not be considered individual tax, legal or financial advice. Talk with your tax professional or financial advisor about how Nebraska's First-Time Homebuyer Savings Account Act applies to your situation.