Homeownership Savings Act

Bill Number

H.R. 8709

Origin Chamber

House

Congress

119th Congress, Session 2

Policy Area

Taxation

Status

Introduced

Latest Action

2026-05-07: Referred to the House Committee on Ways and Means.

Last Updated

2026-05-13T16:06:03Z

AI-Generated Summary

Purpose

The Homeownership Savings Act (H.R. 8709) aims to encourage first-time homebuyers to save for purchasing a primary residence by creating tax-advantaged homeownership savings accounts (HSAs). These accounts allow tax-deductible contributions, tax-free growth, and tax-free withdrawals for qualified expenses like down payments or closing costs.

Key Provisions

• Contributions and Deductions:
• Individuals get an "above-the-line" tax deduction (reducing adjusted gross income) for cash contributions up to $3,000 (joint filers), $2,500 (head of household), or $2,000 (others) per year.
• Limits based on earned income (wages/salary), with special rules for joint filers.
• Phaseout for higher earners based on modified adjusted gross income (MAGI): starts at $242,000 (joint), $200,000 (head of household), $153,000 (others).
• Lifetime cap: $40,000 total contributions; $0 if not a first-time homebuyer.
• Must be age 18+ and certify as a first-time homebuyer when opening.

• Account Rules:
• Trust held by a bank or approved trustee; no life insurance investments; assets not commingled.
• Tax-free growth unless account ceases to qualify.

• Distributions:
• Tax-free if used for qualified homeownership expenses (down payment/closing costs on primary residence as first-time buyer).
• Non-qualified withdrawals taxed as income + 20% penalty (exceptions: death, disability).
• Account automatically terminates 60 days after buying a home; balance treated as distribution.
• Rollovers allowed within 60 days (once per year).

• Employer Contributions:
• Excluded from employee's gross income, Social Security, Medicare, unemployment, and withholding taxes (up to lifetime limit).
• Employers must report on W-2 forms; no salary reductions allowed.

• Penalties and Taxes:
• 6% excise tax on excess contributions.
• Rules for prohibited transactions (similar to IRAs).
• Reporting required by trustees to IRS and account holders.

• Other:
• Inflation adjustments to annual limits starting 2026 (based on 2024 CPI).
• Effective for tax years after December 31, 2026.

Significant Changes to Existing Law

• Adds new Section 223A to the Internal Revenue Code (after Health Savings Accounts in Part VII).
• Creates Section 139J excluding employer contributions from income.
• Amends payroll tax sections (e.g., 3121, 3231, 3306, 3401) to exclude employer contributions.
• Adds taxes/penalties (e.g., excess contributions under 4973, prohibited transactions under 4975).
• Conforming changes to reporting (e.g., W-2, Form 26) and other provisions (e.g., expatriation rules under 877A).

Potential Impacts

• Citizens: Benefits middle-income first-time homebuyers (age 18+) by reducing taxes on savings, potentially increasing homeownership rates and making down payments more affordable. Higher earners phase out; dependents ineligible.
• Government Agencies: IRS gains new enforcement/reporting duties; potential revenue loss from deductions/exclusions (offset by penalties on misuse).
• No notable international relations impacts.

Main Stakeholders Affected

• First-time homebuyers: Primary beneficiaries (must not have owned a home before or used certain tax exclusions).
• Banks and financial institutions: Act as trustees; new business opportunity.
• Employers: Can contribute tax-free, aiding employee retention/benefits.
• IRS and taxpayers: Increased compliance/reporting; penalties for non-compliance.

Notable Legal, Constitutional, or Political Implications

• Legal: Mirrors structures of Health Savings Accounts (HSAs) and IRAs for familiarity; enforceable via existing IRS mechanisms. Defines "first-time homebuyer" narrowly (cross-references Section 36(c) for credits, excludes prior tax-free gains).
• Constitutional: No apparent issues; standard tax incentive under Congress's taxing power.
• Political: Promotes homeownership policy goal without direct spending; income limits target middle class, avoiding broad giveaway.

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

Sponsor

Rep. Stevens, Haley M. [D-MI-11]

Recent Actions

• 2026-05-07: Referred to the House Committee on Ways and Means.
• 2026-05-07: Introduced in House
• 2026-05-07: Introduced in House

Bill Versions

• Homeownership Savings Act — issued 2026-05-07 — PDF (23 pages)