07/02/25

Key Takeaway:
Thanks to the persistent advocacy of the Ohio Bankers League and its member institutions, the recently enacted state operating budget (House Bill 96) includes a vital fix to the Ohio Homebuyer Plus Program—protecting both participating banks and their customers from unintended tax penalties.

Background: What is the Ohio Homebuyer Plus Program?

The Ohio Homebuyer Plus Program helps Ohioans save for a first home by providing:

• Enhanced interest rates on savings accounts through a linked-deposit program with participating banks.
• A state tax deduction of up to $5,000 per year on contributions to Homebuyer Plus Accounts.
• The ability for family members (like parents or grandparents) to contribute and claim the deduction.

By encouraging savings for homeownership, the program benefits customers and expands deposit relationships for banks.

The Problem: Unfair Double Taxation

This year, during income tax filing season, a major issue surfaced:

• Under the original rules, if a customer withdrew funds for a non-qualified expense, the entire withdrawal had to be added to their Ohio income—even if the funds had already been taxed before being contributed.
• Worse, this penalty applied even if no deduction had ever been claimed, leading to unfair double taxation.
• This discouraged participation in the program and placed banks in an awkward position with affected customers.

OBL’s Solution: A Targeted Legislative Fix

Once this unintended consequence was identified by OBL members, the OBL Government Relations Team immediately engaged state leaders, the Ohio Treasurer’s Office, and Governor DeWine’s Administration to find a solution. The successful fix included in House Bill 96 does two important things:

Limits the Penalty Amount:
Now, if funds are withdrawn for ineligible purposes, only the actual amount previously deducted (plus any amounts deposited by other contributors) must be added back to income—eliminating double taxation.

Provides Flexibility and a Grace Period:

• Funds can now be transferred between Homebuyer Plus Accounts at different institutions, as long as the account owner remains the same.
• If a customer mistakenly withdraws funds, they have 90 days to redeposit those funds into a qualified account to avoid penalties.
• The new provisions apply retroactively to 2024, and customers have one year to file amended returns and claim any refunds.

Why It Matters for Banks

This fix:

• Reinforces trust with customers who expect fair treatment when using state-supported savings programs.
• Enhances the value proposition for banks offering Homebuyer Plus Accounts.
• Prevents reputational risks tied to unfair tax consequences.

This success is a direct result of OBL members raising concerns early, engaging with policymakers, and staying active in our advocacy efforts—including during OBL’s annual Day at the Capitol.

Next Steps: Keep Advocating

OBL’s work on issues like these demonstrates the real-world value of our collective voice. Special thanks to the banks that highlighted this issue and to everyone who engaged with legislators.

Stay engaged: Your input shapes our agenda. Reach out to OBL with any additional feedback or concerns related to the Homebuyer Plus Program or other state-linked deposit programs.

Together, we protect Ohio banks, strengthen our communities, and help more Ohioans achieve homeownership.