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Congress·In Committee·about 1 month ago

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

Also known as: Home Savings Act

Legislative Progress

✓ Filed
Review
House
Senate
President

Impact Analysis

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

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

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 1 month 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.

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401k Specialist·about 1 month 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.

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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.

Bill NumberHR 7185
Congress119th Congress
ChamberHouse of Representatives
Latest ActionReferred to the House Committee on Ways and Means.

Sponsor

Cosponsors

(1)
R: 1

Analysis generated by AI. While we strive for accuracy, this should not be considered legal or professional advice. Always verify information with official government sources.