“To amend the Internal Revenue Code of 1986 to allow the establishment of first-time homebuyer savings accounts.”
No CRS summary available for this bill.
This section establishes a new First-time Homebuyer Savings Account (FTHBSA), modeled after health savings accounts, that allows an above-the-line deduction for cash contributions made on behalf of an account beneficiary who is age 18 or older and had no ownership interest in a principal residence during the prior three years. Contributions are limited annually to an amount specified in the provision (excluding rollovers) and over the lifetime to the state threshold amount (i.e., 20% of the median home sale price in the state where the account is established); the account must be administered by a qualified trustee, hold only non-commingled assets excluding life insurance, and be used exclusively for qualified home ownership expenses (i.e., principal residence acquisition, construction, or reconstruction costs such as down payments or closing costs for a first-time homebuyer, as defined in IRC §36(c)). (As background, first-time homebuyer status under §36(c) requires no ownership interest in a principal residence during the three-year period ending on the purchase date.) FTHBSAs are exempt from federal income tax (subject to unrelated business income tax), with tax-free distributions if used exclusively for qualified expenses; otherwise, distributions are includible in the beneficiary's gross income. Accounts terminate upon the beneficiary's acquisition of a principal residence (with the balance treated as distributed after 60 days) or due to prohibited transactions, and excess contributions returned by the tax return due date (with attributable net income) avoid inclusion except for that income.