I’ve subscribed to the Zillow.com email list for 8-10 years. Finally, after hundreds of articles, I found one worth writing about.
Recently, Zillow published More couples turning to wedding registries for help buying their first home. That makes sense because NBC News says, your home-buying dollar goes half as far now.
It seems weird to me to register on The Knot for “home funds.” It’s practical, but the money may get moved to another area of need before the couple has enough for a down payment.
It got me thinking. If you read the title, you know where this is going. If we can save hundreds of dollars in a tax-friendly plan (such as a 529 plan) for education, why can’t we do something similar for shelter?
When a grandparent contributes money to a 529 plan, they know it is going towards education. If it’s used elsewhere, there’s a penalty.
The carrot of a tax break with the punishment of a penalty is a strong motivator. I know many people raid their retirement accounts, but there’s a lot of information explaining why it’s a bad idea. That keeps many, many people using the money how it is intended.
Let me address one obvious criticism…
But Buying a Home Isn’t for Everyone
It’s true. Buying a home isn’t a fit for everyone. Going to college isn’t a fit for everyone, and 529 Plans exist. Many people read “529 plan” and think “college”, but 529 plans are very flexible. They can be used for cooking, golf, and diving school. You have to be sure that they are very specific ones, though. It should go without saying that they apply to trade schools as well.
My proposed housing 529 plan would be just as flexible. It wouldn’t necessarily be for buying a house. It could be used for paying rent as well.
Would some 16-year-olds in high school working after school put money aside for future rent? I don’t expect it would be that many, but I’d love to be able to advise my son to put 10% of his paycheck in a tax-advantaged plan for that purpose.
How do We Fund the Tax Break?
I mentioned that there could be a tax break. If we give a tax benefit, it’s best to make up that revenue somewhere.
I don’t have a specific place where we’ll get the money back. However, I’m expecting that it will reduce homelessness. With reduced homeless, there would be less need for homeless aid. More productive citizens would be working, earning, spending, and paying more taxes. I will stop now because why waste words explaining why homelessness is bad?
I think this would be a great experiment. However, I’m sure I am missing some ramifications. What do you think? Does a home funding 529 plan make sense?