First-time Homebuyer Savings Account Act of 2026

Bill Number

H.R. 7756

Origin Chamber

House

Congress

119th Congress, Session 2

Policy Area

Taxation

Status

Introduced

Latest Action

2026-03-03: Referred to the House Committee on Ways and Means.

Last Updated

2026-03-19T20:11:08Z

AI-Generated Summary

Purpose

The First-time Homebuyer Savings Account Act of 2026 aims to encourage saving for first-time home purchases by creating tax-advantaged savings accounts. It allows eligible individuals to deduct contributions from their taxable income, similar to retirement or health savings accounts, to help cover costs like buying or improving a primary home.

Key Provisions

• Eligible Individuals and Accounts:
• Applies to individuals (and their spouses, if married) who have not owned a primary residence in the past 3 years.
• Homeowner savings accounts must be trusts set up in the U.S. for paying "qualified homeowner expenses," managed by approved trustees like banks or insurance companies.
• Accounts cannot invest in life insurance and must keep assets separate from other funds.

• Contributions:
• Deductible up to the annual IRA contribution limit (e.g., around $7,000, adjusted yearly), or the individual's earned income, whichever is less.
• Capped so the account balance does not exceed 20% of the national average single-family home price (published annually by the Treasury).
• Phaseout for higher earners: Deduction reduces if adjusted gross income exceeds certain thresholds (similar to IRA rules), fully phasing out over a $10,000 range ($20,000 for joint filers).
• Spousal rules allow contributions based on combined income for joint filers where one spouse earns less.
• Rollovers allowed between accounts within 60 days, limited to once per year.

• Qualified Expenses and Distributions:
• Tax-free withdrawals for buying or building a first primary residence, or for certain home repairs, alterations, or improvements (e.g., energy-efficient upgrades, without dollar limits).
• Non-qualified withdrawals are taxable and hit with a 10% penalty, unless they qualify as "exempted distributions" for emergencies (e.g., job loss, major health issues), life events (e.g., marriage leading to home ownership, death, or moving abroad), or other cases defined by regulations.
• Excess contributions can be withdrawn penalty-free before tax filing deadline, but any earnings are taxable.

• Tax Treatment:
• Accounts are tax-exempt while active, but subject to unrelated business income tax if applicable.
• Excess contributions trigger a 6% annual excise tax (added to existing IRS rules).

• Effective Date: Applies to tax years starting after enactment.

Significant Changes to Existing Law

• Adds a new Section 225A to the Internal Revenue Code (Part VII of subchapter B), creating a dedicated savings vehicle modeled after Individual Retirement Accounts (IRAs) and Health Savings Accounts (HSAs).
• Introduces contribution limits tied to home prices and eligibility based on recent homeownership history, which differs from broader IRA/401(k) rules.
• Expands excess contribution penalties under Section 4973 to include these accounts.
• Requires Treasury to annually publish average home prices, a new administrative duty.

Potential Impacts

• On Citizens: Provides tax incentives to save for homeownership, potentially making it easier for first-time buyers (especially lower- to middle-income individuals) to afford down payments or upgrades, boosting homeownership rates.
• On Government Agencies: Increases IRS administrative workload for oversight, reporting, and enforcement; may reduce federal tax revenue due to deductions (estimated billions over time, though not specified in the bill).
• On International Relations: No direct impact, as it focuses on domestic tax policy and U.S. residents.
• Broader effects could include stimulating the housing market and reducing reliance on loans, but risks uneven benefits favoring those who can save.

Main Stakeholders Affected

• First-Time Homebuyers: Primary beneficiaries, gaining tax breaks to build savings without current home ownership.
• Financial Institutions: Banks and insurers act as trustees, potentially expanding services but facing compliance requirements.
• Taxpayers and Families: Spouses and joint filers benefit from combined contribution rules; higher earners see reduced advantages.
• Government Entities: IRS and Treasury Department handle implementation, audits, and price publications.
• Housing Sector: Homebuilders, realtors, and contractors may see increased demand from qualified withdrawals.

Notable Legal, Constitutional, or Political Implications

• Legal: Aligns with existing tax code structures (e.g., referencing IRA limits in Section 219 and mortgage rules in Section 121/143), ensuring compatibility; allows regulatory flexibility for exemptions, which could lead to future IRS guidance or challenges over "qualified" expenses.
• Constitutional: No apparent issues, as it involves standard congressional authority over taxation (Article I, Section 8); promotes equal protection by targeting first-time buyers without overt discrimination.
• Political: Represents a pro-homeownership policy that could appeal across parties by addressing affordability, but may spark debates on tax expenditures versus direct housing subsidies; introduces a new entitlement-like benefit, potentially influencing future budget and tax reform discussions.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Barrett, Tom [R-MI-7]

Recent Actions

• 2026-03-03: Referred to the House Committee on Ways and Means.
• 2026-03-03: Introduced in House
• 2026-03-03: Introduced in House

Bill Versions

• First-time Homebuyer Savings Account Act of 2026 — issued 2026-03-03 — PDF (13 pages)