A proposed bill pending before a state Senate committee would allow Ohioans to take a personal income tax deduction for contributions to and earnings stemming from a first-time homebuyer savings account.
If approved, Senate Bill 139 would reduce personal income tax revenue for the state by between $3.4 and $4.1 million per year, according to an analysis from the Ohio Legislative Service Commission (LSC). Any loss in income tax revenue would split between the state’s General Revenue Fund (GRF), the Local Government Fund (LGF) and the Public Library Fund (PLF).
First-time buyers represent about 35 percent of the 150,000 homes sold annually in Ohio, numbers from the state show. Proponents of the bill say homeownership has a positive effect on the local community as homeowners spend money on house-related goods and services.
“As Ohio competes with other states in wanting to curb the ‘brain drain’ of our young people, homeownership plays a huge role in affording them an opportunity to set down roots in Ohio and raise their own families here,” Realtor Greg Blatt said in prepared testimony to the Senate Ways and Means Committee.
Under the bill, also known as the First-time Home Buyer Savings Act, an account holder can designate an account as a first-time homebuyer savings account. The proposal limits the total deduction an individual may claim to $50,000 and $100,000 for joint returns.
“One of the most significant barriers to homeownership is a down payment,” Anjanette Frye, state president of the Ohio Realtors, said in prepared testimony to the committee. “Although this savings program will not reduce all barriers to homeownership, it is certainly a tool that will help hard-working Ohioans move closer to their goal.”
The bill, sponsored by state Sens. Theresa Gavarone, R-Bowling Green, and Bob Peterson, R-Washington Court House, does not require financial institutions to track accounts designated as first-time homebuyer savings accounts. However, if the account holder uses the money for something other than buying a house, he or she must repay the deduction claimed and a 10 percent penalty.
“At a time in our nation’s history when savings account holdings are at critical levels, we appreciate the proposed bill to bring an investment tool created specifically for our state to encourage more saving,” Tim Williams, executive director of the Ohio Manufactured Homes Association (OMHA), said in prepared testimony to the committee. “Homeownership builds equity, improves credit ratings of owners, produces property taxes for a host of entities and strengthens and stabilizes neighborhoods and communities.”
Several other states, including Montana, Virginia, Colorado and Minnesota have similar policies in place. The Ohio Credit Union League, the Ohio Bankers League and the Ohio Mortgage Bankers Association also expressed their support for the bill.