529 Distributions for Homebuyers Proposed

Representative Tracey Mann (R-KS) and several co-sponsors have introduced H.R. 7468, the First-Time Homebuyer Empowerment Act. According to a press release, the bill would allow first-time homebuyers to use leftover 529 plan funds tax-free to buy or build their first home. To be eligible, the account must have been maintained for the 15-year period ending on the date of distribution, and amounts contributed within the five-year period ending on the date of the distribution are not eligible for distribution. The funds must be used within 60 days of distribution for the purchase of a principal residence by a first-time homebuyer or may be recontributed within 120 days of distribution due to a delay or cancellation of the home purchase. The distribution is limited to $35,000, reduced by any previous rollovers from the 529 arrangement to a Roth IRA.