WeVote
Log In

Bill

Bill

S 5227

First-Time Home Buyer Empowerment Act

119th Congress Introduced by Michael Bennet and 1 co-sponsor

Allows a portion of 529 plan distributions for first-time home purchases up to $35,000 lifetime, with timing and recapture rules.

Introduced in Senate
0
WeVote Research Nonpartisan
Bill Summary · S 5227

First-Time Home Buyer Empowerment Act (S. 5227, 119th Congress)

Purpose and intent

  • This bill amends the Internal Revenue Code to allow certain distributions from long-term Qualified Tuition Programs (529 plans) to be used for first-time home purchases without triggering certain tax penalties.
  • The overarching goal is to empower first-time homebuyers by expanding the set of tax-advantaged options available for funding a home purchase.

Key provisions and changes

  • Section 529(c)(3) amendment adding new subparagraph (F): Special rule for distributions from long-term qualified tuition programs for first home purchases.

    • General idea: A portion of a distribution from a 529 account belonging to the designated beneficiary, if kept in a long-term program for 15 years and used toward buying a principal residence of a first-time homebuyer, is exempt from certain tax limitations that would normally apply.
    • (i) General rule:
    • The portion of the distribution that is eligible for this special treatment is the amount that does not exceed the total contributions (plus earnings) into the program before the 5-year period ending on the distribution date, and is used within 60 days of the distribution to purchase a principal residence for the first-time homebuyer who is the designated beneficiary.
    • (ii) Limitations on aggregate use:
    • Applies only to the original designated beneficiary or a successor designated beneficiary in the same or a lower generation.
    • The total amount of such distributions for the taxable year and all prior years cannot exceed a lifetime aggregate cap of $35,000, minus the amount of distributions to which other subparagraphs (E) apply for that beneficiary in the same period.
    • (iii) Delay in acquisition:
    • If a distribution would fail to meet requirements solely due to delay or cancellation of the home purchase, the amount may be redirected to another qualifying program (529 or ABLE) if substituted as specified, with an extended 120-day window instead of 60.
    • (iv) Tax deferral and recapture:
    • If a qualifying event (e.g., sale or cessation of use as the principal residence) occurs before the end of a 5-year period from purchase, the beneficiary’s tax for that year may be increased by an amount equal to the tax that would have been due on the distribution, plus interest, with a 20% per full year reduction in the increase as time passes. Definitions of “qualifying event” and “deferral period” align with the subparagraph’s rules.
    • (v) Definitions:
    • Terms like “purchase,” “principal residence,” and “first-time homebuyer” retain their meanings as in section 36(c) (related to the Lifetime Learning Credit/credit provisions context).

  • Section 529(c)(3)(E)(ii)(II) coordination:

    • The existing aggregate limitation on special rollovers to Roth IRAs is adjusted to reflect the new $35,000 aggregate cap for distributions described in the new subparagraph (F).

  • Effective date:

    • The amendments apply to distributions made in taxable years beginning after the date of enactment.

who/what would be affected

  • Eligible individuals who are designated beneficiaries of 529 plans (and their successors in the same or lower generations) could use a portion of 529 distributions toward a first-time home purchase without triggering some penalties, subject to the new limits and timing requirements.
  • Families saving in long-term 529 programs for education may see a reallocated portion of funds used for home purchase within the specified 5-year window, subject to the $35,000 cap and other constraints.
  • The rule interacts with existing tax-advantaged distributions from 529 plans and Roth IRA rollover rules, requiring coordination to ensure compliance with aggregate limits.

Procedural and timeline aspects

  • Introduction and referral: Introduced in the Senate on August 4, 2026, by Sen. Husted (with Sen. Bennet as a co-sponsor); referred to the Committee on Finance.
  • Enactment timeline: As a bill, it would need passage by both chambers of Congress and presidential signature; the stated effective date is distributions in taxable years beginning after enactment.

Summary takeaway

S. 5227 creates a new exception within 529 plan distributions to permit first-time homebuyers to use a portion of savings intended for education toward purchasing a home, up to a $35,000 aggregate lifetime limit, with timing, recapture, and coordination rules to limit abuse and ensure orderly application alongside existing tax provisions.

Compiled from official sources — confirm details with the bill’s official record.

Sign in to ask a question.