Beginning in 2014, Virginia has adopted a program (FHSP) that allows a taxpayer to designate an account as a first time homebuyer savings account and subtract the income from that account from their VA taxable income. (Section 58.1-322) The account can only be used to pay the down payment or closing costs for a single family home (includes condos and co-ops, but not a multi-family building or land) in VA for someone who has never owned a home before. This can include a couple where one person was a prior homeowner but one was not. VA law allows you to designate an existing account, or set up a new one as an FHSP account.
No formal paperwork is required at the financial institution; it must only be disclosed on the taxpayer’s tax return along with the income subtraction. The initial account can contain a maximum of $50,000, and the account value can grow to a maximum of $150,000. Cash or marketable securities may be contributed to or in the account that is designated as the FHSP account. A single taxpayer may set up more than one FHSP account and the contribution and maximum value limitation apply separately to each account. Most any financial institution account will qualify under the law including banks, mutual funds, insurance companies or brokerage accounts.
Last year, The Supreme Court ruled in United States v. Windsor that same-sex married couples could be treated as married under federal law. This had broad implications for US federal taxes for same-sex married couples, but at the state level the laws continued to vary state by state. When the IRS issued its guidance, they clarified that for tax purposes the IRS would recognize any marriage entered into legally in a state that allowed the marriage, regardless of current residence.
In states like Maryland or the District of Columbia, which allowed same-sex marriages to be performed in the state and also recognized same-sex marriages entered into legally in other states, the federal tax law and state tax law were now in parity. States that had not yet recognized same-sex marriage, however, like Virginia, were left to their own to determine how to treat same-sex couples residing in their state, even if they were legally married elsewhere. Virginia initially ruled that it would not recognize the marriages, and couples would have to file separate state tax returns, even if they filed a joint federal tax return.
In July of 2013, North Carolina adopted N.C. Gen. Stat. § 105-164.4(a)(11), which imposes the 4.75% general State and applicable local and transit rates of sales and use tax “to the sales price of a service contract” sold by a retailer on or after January 1, 2014 and sourced to this State.
The U.S. Supreme Court has agreed to hear the case of Md. Comptroller of Treasury v. Wynne, (U.S., No. 13-485, cert. granted, 5/27/14) on whether a taxpayer’s resident municipality can tax all of a resident's income or if it must provide a credit for taxes that person paid to other states. This case specifically addresses Maryland’s denial of credits against the MD county income tax; full details are available in our previous post on this case.
On July 30, 2013, District of Columbia Mayor Vincent Gray signed the “Fiscal Year 2014 Budget Support Emergency Act of 2013.” Part of this legislation, the Out-of-State Municipal Bond Tax Repeal Emergency Act of 2013, repeals the 2011 law which required interest income from out-of-state municipal bonds acquired after January 1, 2013 to be included in determining DC taxable income for individuals, estates, and trusts.