Sponsors (11)
The bill makes 529 savings more flexible for first-time home purchases—helping families afford down payments and protecting tax status for delayed closings—while shifting savings away from education and adding caps and recapture tax risk that can complicate planning.
First-time homebuyers and families with 529 accounts can withdraw up to $35,000 tax-free from a long-held 529 for a first home purchase, increasing down-payment resources and lowering upfront homebuying costs.
529 account owners (and families) can recontribute withdrawn funds to a 529 or ABLE account if a home closing is delayed, preserving tax-favored status and shielding savers from timing-related tax losses.
Students and beneficiaries risk having less money available for education because up to $35,000 used for a home reduces the pool of 529 funds, potentially raising future education costs or borrowing needs.
Account owners who use the benefit face a five-year recapture rule: if the home is sold or stops being the principal residence within five years, the withdrawn amount may be subject to tax (plus interest), creating a repayment risk.
The $35,000 lifetime cap (and coordination with Roth rollover limits) restricts how much aid families can get and may complicate tax planning for households balancing education savings and homebuying goals.
Based on analysis of 2 sections of legislative text.
Allows qualified 529 plan distributions from long-held accounts to fund a beneficiary’s first-time principal residence purchase up to a $35,000 lifetime limit, subject to timing and recapture rules.
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
Creates a new limited exception allowing qualified 529 college-savings plan distributions to pay for a designated beneficiary’s first-time purchase of a principal residence without being treated as a nonqualified distribution, subject to rules and limits. The exception applies only to 529 accounts held at least 15 years, to amounts contributed more than 5 years before the distribution (and earnings thereon), is limited to a $35,000 lifetime cap per beneficiary (reduced by certain Roth IRA rollovers), includes temporary recontribution timing for delayed closings, and contains a five-year recapture rule if the home is sold or stops being the principal residence.