Home Savings Act
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.
Legislative Progress
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.
Impact Analysis
Personal Impact
Life & Work
Renters who have retirement savings could use this new tax break to finally afford a down payment and transition to homeownership. However, the bill could also push up home prices by increasing the number of buyers in the market, which could make renting even harder for those who don't have retirement savings to tap. The net effect for renters as a whole is uncertain — it helps some while potentially hurting others.
Programs
Milestones
Referred to the House Committee on Ways and Means.
Introduced in House
The bill was officially filed and given a number. It now enters the legislative queue.
Votes
No votes have been recorded for this legislation yet.
Related News
2 articlesU.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.
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
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.
Data Sources
Sponsor
Cosponsors
(1)Analysis generated by AI. Always verify with official sources.