The Unlocking Homeownership Act amends federal tax law to allow people to withdraw money from 529 college savings plans to help purchase their first home. Under current law, withdrawals from these education savings accounts for non-education purposes face tax penalties, but this bill eliminates that penalty for qualified first-time homebuyers who use the funds to buy or build a principal residence. The beneficiary must use the withdrawn funds within 120 days and can include funds not just for themselves but also for spouses, children, grandchildren, and ancestors. If a home purchase is delayed or canceled due to a qualified disaster, the withdrawn funds can be transferred back into a 529 plan or an ABLE account (used for people with disabilities) without penalty. The bill takes effect immediately upon enactment and includes a provision allowing people who withdrew funds for disaster-affected home purchases to recontribute those funds back into their savings accounts over an extended timeframe.
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