Sen. Theresa Gavorone, R-Bowling Green, and Sen. Bob Peterson, R-Washington Court House, introduced S.B. 139, “First-Time Home Buyer Savings Act."
The measure would allow anyone saving up for a home to open a savings account at any state financial institution. Single tax filers could put in up to $5,000 a year, with married tax filers could contribute up to $10,000. The contributions would be deductible from state income taxes.
The money could be used for down payments and specified closing costs.
If the money was withdrawn and used for a reason other than buying a home, a 10 percent tax penalty would kick in.
“With rising cost of rent and student loan debt, saving enough money for even a modest down payment is nearly impossible for many new home buyers,” said Gavorone, whose district includes Erie and Ottawa counties. “Our legislation will give this, and future generations, a head start on saving enough money to make homeownership a reality instead of a dream.”
The legislation is backed by Ohio REALTORS.
The group’s president, Anjanette “AJ” Frye, said S.B. 139 is modeled after similar legislation that’s been passed into law in eight other states, including Oregon, Virginia, Iowa, Colorado and Minnesota.
First time homebuyers also can make withdrawals from an IRA without having to pay a tax penalty.
Frye said the proposed state savings accounts would be better than using an IRA, however, because the state savings accounts would allow for more money to be put in every year, would not require a special fee and could be withdrawn without paying any taxes.
Gavarone also said her proposal is better than the IRA provision.
While a first time home buyer can withdraw up to $10,000 from a traditional IRA without a tax penalty, the person still has to pay regular taxes. Her proposal would allow a single home buyer to save up to $50,000 for a down payment, while a married person could save up to $100,000, she said.