First-Time Home Buyer Empowerment Act

Use 529 Funds For First Home

You would be able to use part of a 529 college savings account to buy your first principal residence without the usual tax or penalty. To qualify, the 529 plan must have been maintained for at least 15 years, and the exempt portion cannot exceed contributions (and earnings attributable to them) made before the five-year window ending on the withdrawal date. The exempt amount must be used within 60 days to buy the home and is capped at $35,000 per beneficiary in total, reduced by certain rollovers to Roth IRAs. If a purchase is delayed or canceled, you would be able to recontribute the amount to a 529 or ABLE account within 120 days instead of 60. If you sell or stop living in the home within five years, your tax would increase by the tax that would have applied (plus interest), reduced by 20% for each full year you owned the home. These rules would apply to distributions made in tax years beginning after the date of enactment.