Sponsors (11)
The bill makes it easier for 529 beneficiaries to tap tax-preferred savings for a first home (improving down-payment access) but shifts money away from education and adds caps and recapture risks that can complicate planning and create potential tax liabilities.
First-time homebuyers who are beneficiaries of long-held 529 accounts can withdraw up to $35,000 tax-free to use toward a first home purchase, making down payments more affordable.
529 and ABLE account holders can recontribute funds if a home closing is delayed, protecting savers from losing tax-favored status due to timing problems.
Students and families who withdraw 529 funds for a home will have less saved for education, potentially increasing future education costs or debt for the beneficiary.
Beneficiaries who sell the home or stop using it as their principal residence within five years may face a recapture rule that triggers additional tax and interest, creating repayment risk.
The $35,000 lifetime cap (and coordination with Roth rollover limits) limits the benefit's size and can complicate tax and financial planning for families with both education and housing goals.
Based on analysis of 2 sections of legislative text.
Permits limited tax-free 529 plan distributions (up to $35,000 lifetime) for a beneficiary’s first-time principal residence purchase, with recontribution and five-year recapture rules.
Allows certain long-held 529 college savings plan distributions to be used tax-free for a beneficiary’s first-time purchase of a principal residence, subject to conditions and limits. The exemption applies only to accounts maintained at least 15 years with contributions (and earnings) older than 5 years, is capped at a $35,000 lifetime limit per beneficiary, and includes recontribution and recapture rules if the purchase is delayed or the home is sold within five years.
Official title: To amend the Internal Revenue Code of 1986 to allow certain distributions from long-term qualified tuition programs for first home purchases, and for other purposes.
Introduced February 10, 2026 by Tracey Mann · Last progress February 10, 2026