Deduction of Contributions, Exclusion of Earnings, and Limitations.

(a) Except as otherwise provided in this chapter and subject to the limitations under this section, a first-time and second chance home buyer savings account holder shall be entitled to a state tax deduction, subject to the limitations of this section, not to exceed five thousand dollars ($5,000) for an account holder who files an individual tax return or ten thousand dollars ($10,000) for joint account holders who file a joint tax return, for contributions made by the account holder to a first-time and second chance home buyer savings account during the tax year in which the deduction is claimed.

(b) Except as otherwise provided in this chapter and subject to the limitations under this section, earnings from the first-time and second chance home buyer savings account, including interest and other income on the principal, shall be excluded from taxable income of an account holder for Alabama income tax purposes during the tax year.

(c) An account holder may claim the deduction and exclusion under this section as follows:

(1) For a period not to exceed five years.

(2) For an aggregate total amount of principal and earnings not to exceed twenty-five thousand dollars ($25,000) for individual accounts and fifty thousand dollars ($50,000) for joint accounts during the five-year period.

(3) Only if the principal and earnings of the account remain in the account until a withdrawal is made for eligible costs related to the purchase of a single-family residence by a first-time and second chance home buyer.

(d) A person other than the account holder who deposits funds in a first-time and second chance home buyer savings account shall not be entitled to the deduction and exclusion provided under this chapter.

(e) Any funds in a first-time and second chance home buyer savings account not expended on eligible costs by December 31 of the last year of the five-year period beginning with January 1 of the tax year in which a deduction was first claimed under subsection (a) shall thereafter be included in the account holder's taxable income.

(f) The deduction and exclusion from taxable income provided by this chapter shall apply to any alternative basis for calculating taxable income for Alabama income tax purposes.

(g) The funds in the first-time and second chance home buyer savings account shall not be used to purchase a single-family residence outside of this state.

(h) This section shall terminate five years from the effective date of this act for first-time and second chance home buyer savings account holders not currently claiming the deduction and exclusion under this section, unless extended by an act of the Legislature.