First-Time Home Buyer Empowerment Act

First-time home buyers using 529 college savings accounts would gain a new tax break under this bill. It would let a first-time homebuyer withdraw funds from a 529 account that has been open for at least 15 years without paying income tax, as long as the money—up to a lifetime cap of $35,000 (shared with existing 529-to-Roth-IRA rollover limits)—is used within 60 days to buy a principal residence. If the purchase is delayed or falls through, the withdrawn funds could instead be redirected to another qualified tuition program or ABLE account within 120 days. If the buyer later sells the home or stops using it as their primary residence within five years, part or all of the tax benefit could be "recaptured" (added back to their taxes, with interest), though the clawback shrinks by 20% for each full year that has passed since the purchase.

The bill affects individuals with long-held 529 education savings accounts—originally intended for education expenses—who are also first-time homebuyers, as defined elsewhere in the tax code. It effectively broadens the allowable uses of 529 funds beyond education and retirement savings to include home purchases, potentially benefiting families who saved more in a 529 than they ultimately needed for education costs.

The bill was introduced in the Senate on August 4, 2026, by Sen. Jon Husted with Sen. Bennet as a cosponsor, and referred to the Committee on Finance. It has not yet received a committee vote, floor vote, or been signed into law; if enacted, the changes would apply to distributions made in tax years beginning after the enactment date.

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