By Steve Metzer
The Journal Record
OKLAHOMA CITY – People thinking of buying homes in Oklahoma may get an extra incentive if a bill that would allow for tax-free savings for first-time buyers continues to progress at the Capitol.
Senate Bill 961, called the “Oklahoma Home Buyer Savings Account Act,” would allow people to put money into bank accounts set up especially to accumulate savings for things like down payments and closing costs on homes. The savings would be deductible from the account holder’s state taxable income.
The bill already has advanced through the Senate. On Monday, it passed by unanimous vote through a House committee, setting the stage for a vote on the House floor.
State Rep. Tammy West, who authored the bill with Sen. Jason Smalley, said allowing for tax-free savings for home purchases would be good news not just for would-be homeowners but also for their prospective neighbors. Other states that have adopted Home Buyer Savings Account programs have seen rises in homeownership, she said, “and homeownership strengthens our neighborhoods and our economy.”
West compared the tax-free savings initiative to a similar one adopted by the state that allows people to put money aside tax-free to be spent later on a child’s education. She said the Oklahoma Tax Commission projects no negative outcomes for state revenues. Rather, she said that when a typical home is purchased it results in a $50,000 stimulus to the state’s economy.
Smalley has described SB 961 as an investment in people and communities.
“When more Oklahomans have the opportunity to become homeowners, they invest more into their communities and positively impact our state’s economy,” he said.
Qualified people would include those who live in Oklahoma and have not owned or purchased, either individually or jointly, a single-family residence during a period of three years before the date of the purchase. Under the bill, a person would be able to deposit up to $5,000 a year into a designated homebuyer account, or up to $10,000 a year if the account is held jointly. Savings would be allowed to accumulate for up to 10 years, with account holders allowed to deduct deposits annually from their state taxable income. Up to $50,000 would be allowable in principal and interest.
“An account holder may claim the deduction … for an aggregate total amount of principal and earnings, not to exceed $50,000 and only if the principal and earnings remain in the account until a withdrawal is made for eligible costs related to the purchase of a single-family residence by a qualified beneficiary, except as otherwise provided,” the bill states. “A person other than the account holder who deposits funds in a homebuyer savings account shall not be entitled to the deduction.”
If, after 15 years, money isn’t spent on qualified expenses related to a home buy, money left in the account would have to be included in the account holder’s taxable income. If the account holder withdraws money for some unqualified purpose unrelated to a home buy, that money would have to be included in his or her taxable income.
Under the bill, the Oklahoma Tax Commission would be tasked with preparing forms to be used by financial institutions to designate and administer homebuyer savings accounts. If it’s passed into law, the act would take effect Jan. 1, 2020.