Home Savings Act

Section 402 of the Internal Revenue Code of 1986 is amended by adding at the end the following new subsection:

The gross income of an employee for any taxable year shall not include any distribution from a defined contribution plan of such employee to the extent that such distribution is used for a down payment or closing costs associated with acquiring a principal residence of—

(A) the employee, or

(B) an eligible relative of the employee.

For purposes of this subsection—

The term eligible relative means, with respect to any employee—

(i) the spouse of the employee, or

(ii) any child, grandchild, or ancestor of—

(I) the employee, or

(II) the spouse of the employee.

The term defined contribution plan has the meaning given the term in section 414(i).

The term principal residence has the same meaning as when used in section 121.

Rules similar to the rules of section 408(d)(10)(C) shall apply for purposes of this subsection, by taking into account all amounts in the defined contribution plan to which the employee has nonforfeitable right in lieu of all amounts in all individual retirement plans of the individual.

So much of any transfer of a distribution described in paragraph (1) by the employee to an eligible relative as is used by such eligible relative for a down payment or closing costs associated with acquiring a principal residence of such eligible relative shall not be treated as a gift for purposes of section 2503(a).

Paragraph (1) shall not apply to distributions made in taxable years beginning after December 31, 2030.

Section 403 of such Code is amended by adding at the end the following new subsection:

The rules of section 402(m) shall apply to distributions under an annuity plan described in subsection (a) or an annuity contract described in subsection (b).

Paragraph (1) shall not apply to distributions made in taxable years beginning after December 31, 2030.

Section 408(d) of such Code is amended by adding at the end the following new paragraph:

The gross income of an individual for any taxable year shall not include any distribution from an individual retirement plan of such individual to the extent that such distribution is used for a down payment or closing costs associated with acquiring a principal residence of—

(i) the individual, or

(ii) an eligible relative of the individual.

For purposes of this paragraph—

The term eligible relative means, with respect to any individual—

(I) the spouse of the individual, or

(II) any child, grandchild, or ancestor of—

(aa) the individual, or

(bb) the spouse of the individual.

The term individual retirement plan has the meaning given the term in section 7701.

The term principal residence has the same meaning as when used in section 121.

Notwithstanding section 72, in determining the extent to which a distribution is used for a down payment or closing costs pursuant to subparagraph (A), the entire amount of the distribution shall be treated as includible in gross income without regard to such subparagraph to the extent that such amount does not exceed the aggregate amount which would have been so includible if all amounts in all individual retirement plans of the individual were distributed during such taxable year and all such plans were treated as 1 contract for purposes of determining under section 72 the aggregate amount which would have been so includible. Proper adjustments shall be made in applying section 72 to other distributions in such taxable year and subsequent taxable years.

So much of any transfer of a distribution described in subparagraph (A) by the individual to an eligible relative as is used by such eligible relative for a down payment or closing costs associated with acquiring a principal residence of such eligible relative shall not be treated as a gift for purposes of section 2503(a).

Subparagraph (A) shall not apply to distributions made in taxable years beginning after December 31, 2030.

Section 457(e) of such Code is amended by adding at the end the following new paragraph:

The rules of section 402(m) shall apply to distributions under an eligible deferred compensation plan established and maintained by an employer described in paragraph (1)(A).

Subparagraph (A) shall not apply to distributions made in taxable years beginning after December 31, 2030.

The amendments made by this section shall apply to distributions made in taxable years beginning after December 31, 2025.