Sponsors (6)
The bill makes it easier and cheaper in the short term for many savers and their families to use retirement funds to buy homes by excluding qualified distributions from income and easing gift-tax rules, but it shifts risk to individuals' future retirement security, reduces federal revenue through 2026–2030, and adds administrative complexity.
Homebuyers who are retirement-plan participants (or eligible relatives) can exclude qualified retirement-plan distributions used for down payments or closing costs from gross income through 2030, lowering federal tax liability and reducing out-of-pocket costs to buy a home.
The exclusion applies to a wide range of accounts (401(k)-type plans, 403/403(b), 457, and IRAs), so many savers across employment types can access retirement funds for a home purchase without immediate income tax consequences.
Participants may transfer distributions to close relatives for a home purchase without triggering the gift tax under section 2503(a), making it easier for families to support relatives' home purchases.
Individuals who withdraw or transfer retirement funds for home purchases will have smaller retirement balances, increasing the risk of inadequate income or higher dependency on other supports in retirement.
Federal tax revenues will decline from the exclusions between 2026–2030, which could increase the deficit or reduce funding available for other federal programs and services.
Special aggregation rules and adjustments (e.g., section 72 offsets and IRA aggregation) introduce complexity that may create administrative burdens and uncertainty for taxpayers, plan administrators, and the IRS about the correct taxable amounts.
Based on analysis of 2 sections of legislative text.
Temporarily excludes certain retirement-plan withdrawals used for down payments or closing costs on a principal residence from gross income for taxable years 2026–2030.
Creates a temporary tax break that lets people use money from certain retirement accounts for a down payment or closing costs on a principal home without counting the withdrawal as taxable income. The change applies to distributions from defined contribution plans, certain annuity plans, IRAs, and eligible 457 plans and runs for taxable years beginning after December 31, 2025 through taxable years beginning before January 1, 2031. Also allows transfers to eligible relatives (spouse, child, grandchild, ancestor, or spouse of any of those) for this purpose without treating the transfer as a gift for gift-tax rules. It adjusts how normal distribution rules apply and sets special aggregation and reporting rules for IRAs.
Introduced January 21, 2026 by John J. McGuire · Last progress January 21, 2026