[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7422 Introduced in House (IH)]
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119th CONGRESS
2d Session
H. R. 7422
To amend the Internal Revenue Code of 1986 to allow the establishment
of first-time homebuyer savings accounts.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 9, 2026
Mrs. Cammack (for herself and Mr. Moylan) introduced the following
bill; which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to allow the establishment
of first-time homebuyer savings accounts.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Next-Generation Equity Savings Tool
Act'' or the ``NEST Act''.
SEC. 2. FIRST-TIME HOMEBUYER SAVINGS ACCOUNT.
(a) In General.--Part VII of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section 223
the following new section:
``SEC. 223A. FIRST-TIME HOMEBUYER SAVINGS ACCOUNT.
``(a) Deduction Allowed.--In the case of an account beneficiary,
there shall be allowed as a deduction for the taxable year an amount
equal to the aggregate amount paid in cash during such taxable year by
or on behalf of such individual to a first-time homebuyer savings
account of such individual.
``(b) Definitions and Special Rules.--For purposes of this
section--
``(1) First-time homebuyer savings account.--The term
`first-time homebuyer savings account' means a trust created or
organized in the United States exclusively for the purpose of
paying the qualified home ownership expenses of the account
beneficiary (and designated as a first-time homebuyer savings
account at the time created or organized), but only if the
written governing instrument creating the trust meets the
following requirements:
``(A) No contribution will be accepted--
``(i) if the account beneficiary had an
ownership interest in a principal residence at
any time during the 3-year period ending on the
date of the contribution,
``(ii) if such contribution would result in
lifetime aggregate contributions to the account
exceeding the State threshold amount,
``(iii) unless it is in cash, or
``(iv) except in the case of rollover
contributions, if such contribution would
result in aggregate contributions to the
account for the taxable year exceeding the
amount in effect under subsection (b)(1)(B).
``(B) The trustee is a bank (as defined in section
408(n)) or another person who demonstrates to the
satisfaction of the Secretary that the manner in which
that person will administer the trust will be
consistent with the requirements of this section.
``(C) No part of the trust assets will be invested
in life insurance contracts.
``(D) The assets of the trust shall not be
commingled with other property except in a common trust
fund or common investment fund.
``(E) The account beneficiary has attained the age
of 18.
``(2) State threshold amount.--The term `State threshold
amount' means 20 percent of the median home sale price in the
State in which such account is established.
``(3) Qualified home ownership expenses.--The term
`qualified home ownership expenses' means costs to acquire,
construct, or reconstruct a residence, including a down
payment, financing, or other closing costs relating to the
purchase, if such residence is the primary residence of the
account beneficiary of a first-time homebuyer savings account
and such account beneficiary is a first-time homebuyer (as
defined in section 36(c)) with respect to such purchase.
``(4) Account beneficiary.--The term `account beneficiary'
means the individual on whose behalf the first-time homebuyer
savings account is established.
``(5) Certain rules to apply.--Rules similar to the
following rules shall apply for purposes of this section:
``(A) Section 219(d)(2) (relating to no deduction
for rollovers).
``(B) Section 219(f)(3) (relating to time when
contributions deemed made).
``(C) Section 219(f)(5) (relating to employer
payments).
``(D) Section 408(g) (relating to community
property laws).
``(c) Tax Treatment of Accounts.--
``(1) In general.--A first-time homebuyer savings account
is exempt from taxation under this subtitle unless such account
has ceased to be a first-time homebuyer savings account.
Notwithstanding the preceding sentence, any such account is
subject to the taxes imposed by section 511 (relating to
imposition of tax on unrelated business income of charitable,
etc. organizations).
``(2) Account terminations.--
``(A) Acquisition of principal residence.--If the
account beneficiary acquires an ownership interest in a
principal residence--
``(i) each first-time homebuyer savings
account of such beneficiary shall cease to be a
first-time homebuyer savings account as of the
close of the 60-day period beginning on the
date of such acquisition, and
``(ii) the balance of such account as of
such date shall be treated as distributed to
such beneficiary.
``(B) Prohibited transactions, etc.--Rules similar
to the rules of paragraphs (2) and (4) of section
408(e) shall apply to any first-time homebuyer savings
account, and any amounts treated as distributed under
such rules shall be treated as not used to pay
qualified home ownership expenses.
``(d) Tax Treatment of Distributions.--
``(1) Amounts used for qualified home ownership expenses.--
Any amount paid or distributed out of a first-time homebuyer
savings account which is used exclusively to pay qualified home
ownership expenses of any account beneficiary shall not be
includible in gross income.
``(2) Inclusion of amounts not used for qualified home
ownership expenses.--Any amount paid or distributed out of a
first-time homebuyer savings account which is not used
exclusively to pay the qualified home ownership expenses of the
account beneficiary shall be included in the gross income of
such beneficiary.
``(3) Excess contributions returned before due date of
return.--
``(A) In general.--If any excess contribution is
contributed for a taxable year to any first-time
homebuyer savings account of an individual, paragraph
(2) shall not apply to distributions from the first-
time homebuyer savings accounts of such individual (to
the extent such distributions do not exceed the
aggregate excess contributions to all such accounts of
such individual for such year) if--
``(i) such distribution is received by the
individual on or before the last day prescribed
by law (including extensions of time) for
filing such individual's return for such
taxable year, and
``(ii) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in clause (ii) shall be
included in the gross income of the individual for the
taxable year in which it is received.
``(B) Excess contribution.--For purposes of
subparagraph (A), the term `excess contribution' means
any contribution (other than a rollover contribution
described in paragraph (5)) which is neither excludable
from gross income under section 139J nor deductible
under this section.
``(4) Additional tax for distributions not used for home
ownership expenses.--
``(A) In general.--The tax imposed by this chapter
for any taxable year on any taxpayer who receives a
payment or distribution from a first-time homebuyer
savings account which is includible in gross income
shall be increased by 20 percent of the amount which is
so includible.
``(B) Exceptions.--Subparagraph (A) shall not apply
if the payment or distribution is made to the account
beneficiary (or to the estate of such account
beneficiary) on or after the death of such account
beneficiary.
``(5) Rollover contribution.--An amount is described in
this paragraph as a rollover contribution if it meets the
following requirements:
``(A) In general.--Paragraph (2) shall not apply to
any amount paid or distributed from a first-time
homebuyer savings account to the account beneficiary to
the extent the amount received is paid into a first-
time homebuyer savings account for the benefit of such
beneficiary not later than the 60th day after the day
on which the beneficiary receives the payment or
distribution.
``(B) Limitation.--This paragraph shall not apply
to any amount described in subparagraph (A) received by
an individual from a first-time homebuyer savings
account if, at any time during the 1-year period ending
on the day of such receipt, such individual received
any other amount described in subparagraph (A) from a
first-time homebuyer savings account which was not
includible in the individual's gross income because of
the application of this paragraph.
``(6) Special rules for death and divorce.--Rules similar
to the rules of paragraphs (7) and (8) of section 223(f) shall
apply for purposes of this section.
``(7) Disallowance of excluded amounts as deduction,
credit, or exclusion.--No deduction, credit, or exclusion shall
be allowed to the taxpayer under any other section of this
chapter for any qualified home ownership expenses to the extent
taken into account in determining the amount of the exclusion
under paragraph (1).
``(e) Contribution Limit Adjustment.--
``(1) In general.--Except as provided in paragraph (2), in
the case of any taxable year beginning after 2025, the
Secretary, after consultation with the Secretary of Housing and
Urban Development, shall adjust the State threshold amount for
each State to reflect the median home price in each such State
using the most recent data available to the Secretary.
``(2) Limit may not be lowered.--The adjustment described
in paragraph (1) may only be used to increase the State
threshold amount for a State.
``(f) Reports.--
``(1) In general.--The trustee of a first-time homebuyer
savings account shall make such reports regarding such account
to the Secretary and to the account beneficiary with respect to
contributions, distributions, and such other matters as the
Secretary may require. The reports required by this subsection
shall be filed at such time and in such manner and furnished to
such individuals at such time and in such manner as may be
required.
``(2) Rollover distributions.--In the case of any
distribution described in subsection (e)(5), the officer or
employee having control of the first-time homebuyer savings
account (or their designee) shall provide a report to the
trustee of the first-time homebuyer savings account to which
the distribution is made. Such report shall be filed at such
time and in such manner as the Secretary may require and shall
include information with respect to the contributions,
distributions, and earnings of the first-time homebuyer savings
account as of the date of the distribution described in such
subsection, together with such other matters as the Secretary
may require.''.
(b) Deduction Allowed Above the Line.--Section 62(a) of such Code
is amended by inserting after paragraph (21) the following new
paragraph:
``(22) First-time homebuyer savings accounts.--The
deduction allowed by section 223A.''.
(c) Exclusions for Employer Contributions to First-Time Homebuyer
Savings Accounts.--
(1) Exclusion from income tax.--
(A) In general.--Part III of subchapter B of
chapter 1 of such Code is amended by inserting after
section 139I the following new section:
``SEC. 139J. FIRST-TIME HOMEBUYER SAVINGS ACCOUNT CONTRIBUTIONS.
``In the case of an account beneficiary (as defined in section
223A(c)(3)), gross income does not include amounts contributed by such
account beneficiary's employer to any first-time homebuyer savings
account (as defined in section 223A(c)(1)) of such account
beneficiary.''.
(B) Clerical amendment.--The table of sections for
part III of subchapter B of chapter 1 of such Code is
amended by inserting after the item relating to section
139I the following new item:
``Sec. 139J. First-time homebuyer savings account contributions.''.
(2) Exclusion from employment taxes.--
(A) Social security taxes.--
(i) In general.--Section 3121(a) is amended
by striking ``or'' at the end of paragraph
(22)(B), by striking the period at the end of
paragraph (23) and inserting ``, or'', and by
inserting after paragraph (23) the following
new paragraph:
``(24) any payment made to or for the benefit of an
employee if at the time of such payment it is reasonable to
believe that the employee will be able to exclude such payment
from income under section 139J.''.
(ii) Conforming amendment to social
security act.--Section 209(a) of the Social
Security Act is amended by striking ``or'' at
the end of paragraph (19), by striking ``).''
at the end of paragraph (20) and inserting ``;
or'', and by inserting after paragraph (20) the
following new paragraph:
``(21) any reimbursement which is excludable from gross
income under section 139J of the Internal Revenue Code of
1986.''.
(B) Railroad retirement tax.--Section 3231(e) of
such Code is amended by adding at the end the following
new paragraph:
``(13) First-time homebuyer savings account
contributions.--The term `compensation' shall not include any
payment made to or for the benefit of an employee if at the
time of such payment it is reasonable to believe that the
employee will be able to exclude such payment from income under
section 139J.''.
(C) Unemployment tax.--Section 3306(b) of such Code
is amended by striking ``or'' at the end of paragraph
(19)(B), by striking the period at the end of paragraph
(20) and inserting ``; or'', and by inserting after
paragraph (20) the following new paragraph:
``(21) any payment made to or for the benefit of an
employee if at the time of such payment it is reasonable to
believe that the employee will be able to exclude such payment
from income under section 139J.''.
(D) Withholding tax.--Section 3401(a) of such Code
is amended by striking ``or'' at the end of paragraph
(22), by striking the period at the end of paragraph
(23) and inserting ``; or'', and by inserting after
paragraph (23) the following new paragraph:
``(24) any payment made to or for the benefit of an
employee if at the time of such payment it is reasonable to
believe that the employee will be able to exclude such payment
from income under section 139J.''.
(3) Employer contributions required to be shown on w-2.--
Section 6051(a) of such Code is amended by striking ``and'' at
the end of paragraph (16), by striking the period at the end of
paragraph (17) and inserting ``, and'', and by inserting after
paragraph (17) the following new paragraph:
``(18) the amount contributed to any first-time homebuyer
savings account (as defined in section 223A(c)(1)) of such
employee.''.
(d) Tax on Excess Contributions.--
(1) In general.--Section 4973(a) of such Code is amended by
striking ``or'' at the end of paragraph (5), by inserting
``or'' at the end of paragraph (6), and by inserting after
paragraph (6) the following new paragraph:
``(7) a first-time homebuyer savings account (within the
meaning of section 223A).''.
(2) Excess contribution.--Section 4973 of such Code is
amended by adding at the end the following new subsection:
``(i) Excess Contributions to First-Time Homebuyer Savings
Account.--For purposes of this section, in the case of first-time
homebuyer savings accounts (as defined in section 223A), the term
`excess contributions' means the sum of--
``(1) the aggregate amount contributed for the taxable year
to first-time homebuyer savings accounts (other than a rollover
contribution contributed under section 223A(e)(4) or (6)) which
is neither excludable from gross income under section 139J nor
allowable as a deduction under section 223A for such year, plus
``(2) the amount determined under this subsection for the
preceding taxable year, reduced by the sum of--
``(A) the distribution out of the first-time
homebuyer savings accounts which were included in gross
income under section 223A(e)(1), plus
``(B) the excess (if any) of--
``(i) the maximum amount allowable as a
deduction under section 223A(b) (determined
without regard to section 139J) for the taxable
year, over
``(ii) the amount contributed to first-time
homebuyer savings accounts for the taxable
year.
For purposes of this subsection, any contribution which
is distributed out of the first-time homebuyer savings
account in a distribution to which section
223A(e)(4)(C) applies shall be treated as an amount not
contributed.''.
(e) Tax on Prohibited Transactions.--
(1) Section 4975(c) of such Code is amended by adding at
the end the following new paragraph:
``(8) Special rule for first-time homebuyer savings
accounts.--An individual for whose benefit a first-time
homebuyer savings account (within the meaning of section
223A(c)) is established shall be exempt from the tax imposed by
this section with respect to any transaction concerning such
account (which would otherwise be taxable under this section)
if, with respect to such transaction, the account ceases to be
a first-time homebuyer savings account by reason of the
application of section 223(d)(2) to such account.''.
(2) Section 4975(e)(1) of such Code is amended by striking
``or'' at the end of subparagraph (F), by redesignating
subparagraph (G) as subparagraph (H), and by inserting after
subparagraph (F) the following new subparagraph:
``(G) a first-time homebuyer savings account
described in section 223A(c).''.
(f) Penalty for Failure To File Reports.--Section 6693(a)(2) of
such Code is amended by striking ``and'' at the end of subparagraph
(E), by striking the period at the end of subparagraph (F) and
inserting ``, and'', and by inserting after subparagraph (F) the
following new subparagraph:
``(G) Section 223A(g) (relating to first-time
homebuyer savings accounts).''.
(g) Conforming Amendments.--
(1) Section 26(b)(2) of such Code is amended by striking
``and'' at the end of subparagraph (Y), by striking the period
at the end of subparagraph (Z) and inserting ``, and'', and by
inserting after subparagraph (Z) the following new
subparagraph:
``(AA) section 223A(e)(2) (relating to additional
tax on first-time homebuyer savings account not used
for qualified home ownership expenses).''.
(2) Section 408(e)(2)(ii) of such Code is amended by
inserting ``or to a first-time homebuyer savings account under
section 223A(e)(7)'' before the period.
(3) Section 530(d)(9)(A)(ii) of such Code is amended by
inserting ``, to a first-time homebuyer savings account under
section 223A(e)(7),'' after ``section 408(e)(2)''.
(4) Section 877A of such Code is amended--
(A) in subsection (e)(2) by inserting ``a first-
time homebuyer savings account (as defined in section
223A),'' after ``section 223),'', and
(B) in subsection (g)(6) by inserting
``223(e)(4),'' after ``529A(c)(3),''.
(5) The table of sections for part VII of subchapter B of
chapter 1 of such Code is amended by inserting after the item
relating to section 223 the following new item:
``Sec. 223A. First-time homebuyer savings account.''.
(h) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
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