H.R. 6542

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6542 Introduced in House (IH)]

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119th CONGRESS
1st Session
H. R. 6542

To amend the Internal Revenue Code of 1986 to allow the establishment 
of down payment savings accounts.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

December 9, 2025

Mr. Subramanyam (for himself, Mrs. Hinson, Mr. Thanedar, and Ms. 
Norton) 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 down payment 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 ``First Home Savings Opportunity Act 
of 2025''.

SEC. 2. DOWN PAYMENT 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. DOWN PAYMENT 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 
such individual to a down payment savings account of such individual.
``(b) Definitions and Special Rules.--For purposes of this 
section--
``(1) Down payment savings account.--The term `down payment 
savings account' means a trust created or organized in the 
United States exclusively for the purpose of paying the 
qualified down payment expenses of the account beneficiary (and 
designated as a down payment 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 such contribution is not made by 
the account beneficiary,
``(ii) 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, or
``(iii) unless it is in cash.
``(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) Qualified down payment expenses.--The term `qualified 
down payment expenses' means a down payment or closing costs 
for the purchase of the principal residence of the account 
beneficiary of a down payment savings account if such account 
beneficiary is a first-time homebuyer (as defined in section 
36(c)) with respect to such purchase.
``(3) Account beneficiary.--The term `account beneficiary' 
means the individual on whose behalf the down payment savings 
account is established.
``(4) 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).
``(5) Principal residence.--The term `principal residence' 
has the same meaning as when used in section 121.
``(c) Limitations.--
``(1) Contribution limit.--The amount allowable as a 
deduction under subsection (a) to any individual for any 
taxable year shall not exceed the lesser of--
``(A) the taxpayer's earned income (as defined in 
section 32(c)(2)) for the taxable year, or
``(B) $10,000 ($20,000 in the case of a joint 
return).
``(2) Phaseout based on modified adjusted gross income.--
``(A) In general.--The deduction allowable under 
subsection (a) shall be reduced by an amount which 
bears the same ratio to the amount of such deduction 
as--
``(i) the excess (if any) of--
``(I) the taxpayer's modified 
adjusted gross income, over
``(II) $150,000 ($236,000 in the 
case of a joint return), bears to
``(ii) $50,000 ($79,000 in the case of a 
joint return).
``(B) Modified adjusted gross income.--For purposes 
of subparagraph (A), the term `modified adjusted gross 
income' means the adjusted gross income of the taxpayer 
for the taxable year increased by any amount excluded 
from gross income under section 911, 931, or 933.
``(3) Denial of deduction to dependents.--No deduction 
shall be allowed under this section to any individual with 
respect to whom a deduction under section 151 is allowable to 
another taxpayer for a taxable year beginning in the calendar 
year in which such individual's taxable year begins.
``(4) Inflation adjustment.--
``(A) In general.--In the case of any taxable year 
beginning after 2025, each of the dollar amounts in 
this subsection shall be increased by an amount equal 
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment 
determined under section 1(f)(3) for the 
calendar year in which the taxable year begins, 
determined by substituting `calendar year 2024' 
for `calendar year 2016' in subparagraph 
(A)(ii) thereof.
``(B) Rounding.--If any increase under paragraph 
(1) is not a multiple of $100, such increase shall be 
rounded to the nearest multiple of $100.
``(d) Tax Treatment of Distributions.--
``(1) Amounts used for qualified down payment expenses.--
Any amount paid or distributed out of a down payment savings 
account which is used exclusively to pay qualified down payment 
expenses of any account beneficiary shall not be includible in 
gross income.
``(2) Inclusion of amounts not used for qualified down 
payment expenses.--Any amount paid or distributed out of a down 
payment savings account which is not used exclusively to pay 
the qualified down payment 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 down payment 
savings account of an individual, paragraph (2) shall 
not apply to distributions from the down payment 
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 to a down payment savings account 
(other than a rollover contribution described in 
paragraph (5)) which is not deductible under this 
section.
``(4) Additional tax for distributions not used for down 
payment 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 down payment 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--
``(i) made to the account beneficiary (or 
to the estate of such account beneficiary) on 
or after the death of such account beneficiary, 
or
``(ii) attributable to such account 
beneficiary's being disabled (within the 
meaning of section 72(m)(7)).
``(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 down payment 
savings account to the account beneficiary to the 
extent the amount received is paid into a down payment 
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 down payment 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 down 
payment 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 down payment expenses to the extent 
taken into account in determining the amount of the exclusion 
under paragraph (1).
``(8) Account termination.--Rules similar to the rules of 
paragraphs (2) and (4) of section 408(e) shall apply to down 
payment savings accounts, and any amount treated as distributed 
under such rules shall be treated as not used to pay qualified 
down payment expenses.
``(e) Reports.--
``(1) In general.--The trustee of a down payment 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 (d)(5), the officer or 
employee having control of the down payment savings account (or 
their designee) shall provide a report to the trustee of the 
down payment 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 down payment 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 to Non-Itemizers.--Section 63(b) of such Code 
is amended--
(1) in paragraph (6), by striking ``and'' and inserting a 
comma,
(2) in paragraph (7), by striking the period at the end and 
inserting ``, and'', and
(3) by adding at the end the following new paragraph:
``(8) the deduction allowed by section 223A.''.
(c) 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 down payment savings accounts.--An 
individual for whose benefit a down payment savings account 
(within the meaning of section 223A(b)(1)) 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 down payment savings 
account by reason of the application of section 223(c)(8) 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 down payment savings account described in 
section 223A(b)(1).''.
(d) 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 down payment 
savings accounts).''.
(e) 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(c)(2) (relating to additional 
tax on down payment savings account not used for 
qualified down payment expenses).''.
(2) Section 877A of such Code is amended--
(A) in subsection (e)(2) by inserting ``a down 
payment 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),''.
(3) 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. Down payment savings account.''.
(f) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.
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