Sponsors (2)
The bill lets first-time homebuyers tap 529 plans tax-free for a primary residence and preserves tax-advantaged treatment when purchases fail or are disrupted by disasters, at the cost of potentially reducing education savings, lowering federal revenue, and adding administrative complexity.
First-time homebuyers (beneficiary or close family) can use 529 plan distributions tax-free to pay up to qualified acquisition costs for a principal residence if used within 120 days, making home purchases more affordable.
Account owners can rollover or recontribute failed purchase distributions into another 529 or ABLE account (under special 60-day/transfer rules), preserving tax-advantaged status when a purchase is delayed or cancelled.
Beneficiaries in declared disaster areas can treat certain disaster-period distributions as qualified and get extended time to recontribute, giving flexibility to those who lose a planned purchase due to disasters.
Using 529 funds for home purchases can deplete savings intended for education, leaving beneficiaries and families with less money for future qualified education expenses.
Expanding tax-free uses of 529 plans will reduce future federal tax revenue, which could increase the deficit or require offsets that affect other taxpayers or programs.
The added rollover, recontribution, and disaster rules increase complexity for account owners and plan administrators, raising administrative burden and the risk of confusion or inadvertent tax penalties.
Based on analysis of 2 sections of legislative text.
Adds a new qualified 529-plan distribution category to allow tax-favored withdrawals for first-time home purchases used within 120 days, with recontribution and transfer rules.
Official title: To amend the Internal Revenue Code of 1986 to allow distributions from qualified tuition programs for first home purchases, and for other purposes.
Introduced February 5, 2026 by Tim Moore · Last progress February 5, 2026
Allows 529 college savings plans to be used, tax-free, for first-time home purchases. The bill creates a new qualified distribution category so that a beneficiary (or their spouse, child, grandchild, or ancestor) may use plan funds within 120 days to pay qualified acquisition costs for a principal residence without incurring taxes on the distribution, and it sets definitions, recontribution/transfer rules if a purchase is delayed or canceled, and special treatment for certain disaster-related distributions. The change applies to distributions made after enactment.