Congress·In Committee·H.R. 7468

House Committee Reviews Bill Letting First-Time Buyers Pull $35K From 529 Plans Tax-Free

First-Time Home Buyer Empowerment Act

about 1 month ago·View on Congress.gov

Part of: New Bills Propose Using 529 Savings for First-Time Home Purchases

Legislative Progress

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Senate

President

Law

Key Points

This bill would change the rules for college savings accounts, known as 529 plans. It would allow people to take out up to $35,000 to buy their first home without having to pay the usual tax penalties on that money.
To qualify for this benefit, the savings account must have been open for at least 15 years. Additionally, the specific money being withdrawn must have been sitting in the account for at least five years before it is used for the home purchase.
This policy aims to help young adults who have leftover money in their college funds. Instead of the money being stuck or subject to high fees, they could use it to help with a down payment or closing costs on their first house.
There is a 'stay-in-place' rule to prevent people from taking advantage of the system. If you sell the house or move out within five years of buying it, you may have to pay back the tax savings. This penalty decreases by 20% for every year you live in the home.
The $35,000 limit is a lifetime maximum. This limit is shared with other rules that allow people to move college savings into retirement accounts. This means you can use the money for a home or retirement, but the total amount for both cannot exceed $35,000.

TaxesHousingEducation

Impact Analysis

Personal Impact

Who is affectedScoreImpactCertaintyScopeDurationSentiment

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

Milestones

2 milestones2 actions

Feb 10, 2026House

Referred to the House Committee on Ways and Means.

Feb 10, 2026

Introduced in House

What Happens Next

Projected impacts based on AI analysis

Within 6-12 months of enactment

IRS issues guidance and regulations on recapture rules and qualifying events

The IRS would need to clarify details like how the 5-year recapture penalty works if you sell or move out of your home, how the 20% annual reduction is calculated, and what exceptions apply. Homebuyers would need this guidance before making withdrawals to understand the full tax implications.

Related News

1 article

Quiver Quantitative·27 days ago

New Bill: Representative Tracey Mann introduces H.R. 7468: First-Time Home Buyer Empowerment Act

The bill allows 529 account holders to withdraw funds for a principal residence if the account has been open for 15 years and the specific funds were held for at least 5 years. It includes a 'stay-in-place' rule where tax savings must be repaid if the owner moves within five years.