Sponsors (2)
The bill lets people tap 529 savings for first-time home purchases (with rollover and disaster protections), making homebuying more accessible but risking depleted education savings, some revenue loss, and added administrative complexity.
First-time homebuyers (and eligible family members like a spouse, child, grandchild, or ancestor) 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 for those who have education savings.
Account owners and beneficiaries can roll over or recontribute failed purchase distributions into another 529 or ABLE account (with specified 60‑day/transfer rules), preserving tax‑advantaged treatment when a home purchase is delayed or canceled.
Beneficiaries in declared disaster areas (especially lower-income households) can treat certain disaster-period distributions as qualified and get an extended recontribution 'applicable period' when a qualified disaster prevents a purchase, reducing financial harm after disasters.
Taxpayers at large may face reduced federal tax revenue because expanding tax-free uses of 529 plans lowers future tax receipts, which could increase the deficit or require offsets that affect other programs or taxes.
Parents, families, and students who use 529 funds for a home purchase risk depleting savings intended for education, leaving less money available to pay future qualified education expenses.
Account owners and plan administrators face added complexity from the new transfer, recontribution, and disaster-period rules, increasing administrative burden and the chance of confusion or inadvertent tax penalties.
Based on analysis of 2 sections of legislative text.
Allows tax-favored 529 plan withdrawals to pay for a first-time home purchase within 120 days, with transfer/recontribution and disaster rules.
Introduced February 5, 2026 by Tim Moore · Last progress February 5, 2026
Allows money in 529 college savings plans to be used, without tax penalty, to buy a first home for the plan beneficiary (or the beneficiary's spouse, child, grandchild, or ancestor) if the funds are used within 120 days for qualified acquisition costs. The change adds rules for delayed or canceled purchases, limits on recontributing distributed funds, and special treatment for disaster-related situations, and applies to distributions made after enactment.