Congress·In Committee·H.R. 7185

Congress Proposes Tax-Free Retirement Withdrawals to Help Families Pay for New Homes

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.

Also known as: Home Savings Act

2 months ago·View on Congress.gov

Legislative Progress

House

Senate

President

Law

Key Points

Congress is considering a new plan that would allow people to take money out of their retirement accounts tax-free to buy a house. Usually, you have to pay income tax when you withdraw this money, but this bill would remove that cost if the money goes toward a down payment or closing costs.
The policy would help more than just the account owner; it also allows people to withdraw money tax-free to help their children, grandchildren, or parents buy a home. This makes it easier for families to pool their resources to afford a place to live.
This change would apply to most common retirement plans, including 401(k)s and IRAs. While this helps people buy homes now, a potential trade-off is that using this money early means there will be less saved up for when a person stops working later in life.
If the bill becomes law, these tax-free withdrawals would be available starting in 2026 and would last through the end of 2030. This gives families a five-year window to use their savings for a home purchase.

TaxesHousing

Impact Analysis

Personal Impact

Who is affectedScoreImpactCertaintyScopeDurationSentiment

Scores: 1 = low, 5 = highSentiment: -5 to +5 (net benefit)

Milestones

2 milestones2 actions

Jan 21, 2026House

Referred to the House Committee on Ways and Means.

Jan 21, 2026

Introduced in House

Related News

2 articles

Crain's Cleveland Business·about 2 months ago

U.S. House bill allows penalty-free 401(k) withdrawals for homes as Trump expresses doubt

Rep. John McGuire (R-Va.) introduced the Home Savings Act, which would amend the tax code to allow penalty-free withdrawals from 401(k) accounts for down payments or closing costs. The bill also allows gifting these funds to relatives tax-free for the same purpose.

401k Specialist·about 2 months ago

New Bill Would Forgive 401(k) Withdrawal Fines for Home Buyers

Introduced by Rep. John McGuire, the Home Savings Act would eliminate the 10% early withdrawal penalty for 401(k) funds used for primary residence costs. The bill faces an uncertain future in Congress as it currently lacks co-sponsors and broad administration backing.

Source Information

Document Type

Congressional Bill

Official Title

Bill NumberHR 7185

Congress119th Congress

ChamberHouse of Representatives

Latest ActionReferred to the House Committee on Ways and Means.

Sponsor

Cosponsors

(1)

R: 1

Data Sources

Congress.gov

Official legislative information

Analysis generated by AI. Always verify with official sources.