Sponsors (6)
The bill makes it easier and tax‑advantageous for buyers (including via family transfers) to use retirement savings for home purchases through 2030, improving short‑term affordability while increasing the risk of smaller retirement nest eggs, reduced federal revenue, and greater tax administration complexity.
Middle‑class homebuyers and retirement savers can exclude distributions used for down payments or closing costs from federal taxable income (through 2030), and this exclusion applies across 401(k)/403(b)/457 plans and IRAs—lowering near‑term federal tax liability for many prospective buyers.
Participants may transfer distributions to close relatives to support a home purchase without triggering the federal gift tax under section 2503(a), making family assistance for buying a home simpler.
People who tap retirement accounts for home purchases will reduce their retirement balances and may have less income or financial security in retirement.
Federal tax revenue will decline between 2026–2030 because of the exclusion, potentially increasing the deficit or reducing funds available for other public services.
Special aggregation and calculation rules (section 72 adjustments and IRA aggregation) add administrative complexity and create uncertainty for taxpayers, plan administrators, and financial institutions about taxable amounts.
Based on analysis of 2 sections of legislative text.
Permits temporary exclusion from gross income for qualified retirement-plan and IRA distributions used for down payment or closing costs on a principal residence (2026–2030).
Creates a temporary tax exclusion that lets people withdraw money from retirement accounts tax-free when the money is used for a down payment or closing costs to buy a principal residence for the participant or certain family members. The exclusion applies to distributions from defined contribution plans, annuity plans, IRAs, and eligible 457 plans for taxable years beginning after Dec. 31, 2025, and ends for distributions made in taxable years beginning after Dec. 31, 2030.
Official title: To amend the Internal Revenue Code of 1986 to exclude from gross income certain retirement plan distributions used for a down payment or closing costs for a principal residence, and for other purposes.
Introduced January 21, 2026 by John J. McGuire · Last progress January 21, 2026