Unlocking Homeownership Act

Use 529 savings for a first home

If enacted, you would be able to use money from a 529 plan to pay first-time homebuyer acquisition costs without the usual tax and penalty for nonqualified withdrawals. The money must be used within 120 days after receipt to pay qualified acquisition costs for the principal residence of a first-time homebuyer. A first-time homebuyer is someone who (with their spouse) had no present ownership interest in a principal residence during the two years before the acquisition date. The homebuyer may be the 529 beneficiary, the beneficiary's spouse, or the beneficiary's child, grandchild, or ancestor. If a purchase is delayed or canceled, you would be able to transfer the amount to another 529 for the beneficiary or to the beneficiary's ABLE account within 120 days (instead of 60 days), and that transfer would be excepted from a named anti-abuse rule. If a major disaster prevents use of withdrawn funds for a home in the declared disaster area, you would be able to recontribute up to the withdrawn amount to a 529 or ABLE account during the disaster "applicable period," and that recontribution would be treated as a 60-day transfer for timing rules.