Sponsors (2)
The bill creates a tax-advantaged First-Home Savings Account that meaningfully helps eligible first-time buyers save via deductions and tax-free withdrawals, but it excludes recent homeowners, caps savings (especially in high-cost states), imposes stiff penalties for nonqualified use, and shifts modest payroll-tax revenue while adding compliance burdens.
Prospective first-time homebuyers (young adults and middle-class families) can reduce taxable income when saving for a home because FHSA contributions are deductible and qualified withdrawals (down payment/closing/financing) are tax-free.
Employees benefit from employer FHSA contributions being excluded from gross income and payroll wage bases, lowering taxable wages and payroll taxes on those amounts.
State-tied contribution caps (based on 20% of median state home sale price) aim to calibrate lifetime contribution limits to local housing costs so limits vary with local markets.
Individuals who owned a principal residence within the prior three years are barred from contributing, excluding many potential buyers (including those who recently sold) from using the FHSA.
Lifetime and annual contribution caps tied to state median prices may significantly limit how much people can save in high-cost states, reducing the benefit for many prospective buyers there.
A 20% additional tax on nonqualified distributions raises the cost of mistakes or changed plans, increasing financial risk if funds are used for non-home purposes.
Based on analysis of 2 sections of legislative text.
Introduced February 9, 2026 by Kat Cammack · Last progress February 9, 2026
Creates a new tax-favored savings account for adults saving to buy a first home. Individuals age 18 and older who have not owned a principal residence in the prior three years can deduct cash contributions from gross income, make tax-free withdrawals for qualified home ownership expenses, and are subject to lifetime and annual contribution limits tied to state median home prices. Accounts must be held in U.S. trusts, prohibit life insurance investments, allow rollovers between such accounts, and require trustee reporting to the IRS. Employers may contribute tax-free on behalf of employees; several payroll- and retirement-tax rules are amended. Most changes apply for taxable years beginning after December 31, 2025.