H.R. 7422

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7422 Introduced in House (IH)]

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119th CONGRESS
2d Session
H. R. 7422

To amend the Internal Revenue Code of 1986 to allow the establishment 
of first-time homebuyer savings accounts.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

February 9, 2026

Mrs. Cammack (for herself and Mr. Moylan) 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 first-time homebuyer 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 ``Next-Generation Equity Savings Tool 
Act'' or the ``NEST Act''.

SEC. 2. FIRST-TIME HOMEBUYER 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. FIRST-TIME HOMEBUYER 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 
or on behalf of such individual to a first-time homebuyer savings 
account of such individual.
``(b) Definitions and Special Rules.--For purposes of this 
section--
``(1) First-time homebuyer savings account.--The term 
`first-time homebuyer savings account' means a trust created or 
organized in the United States exclusively for the purpose of 
paying the qualified home ownership expenses of the account 
beneficiary (and designated as a first-time homebuyer 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 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,
``(ii) if such contribution would result in 
lifetime aggregate contributions to the account 
exceeding the State threshold amount,
``(iii) unless it is in cash, or
``(iv) except in the case of rollover 
contributions, if such contribution would 
result in aggregate contributions to the 
account for the taxable year exceeding the 
amount in effect under subsection (b)(1)(B).
``(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) State threshold amount.--The term `State threshold 
amount' means 20 percent of the median home sale price in the 
State in which such account is established.
``(3) Qualified home ownership expenses.--The term 
`qualified home ownership expenses' means costs to acquire, 
construct, or reconstruct a residence, including a down 
payment, financing, or other closing costs relating to the 
purchase, if such residence is the primary residence of the 
account beneficiary of a first-time homebuyer savings account 
and such account beneficiary is a first-time homebuyer (as 
defined in section 36(c)) with respect to such purchase.
``(4) Account beneficiary.--The term `account beneficiary' 
means the individual on whose behalf the first-time homebuyer 
savings account is established.
``(5) 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).
``(c) Tax Treatment of Accounts.--
``(1) In general.--A first-time homebuyer savings account 
is exempt from taxation under this subtitle unless such account 
has ceased to be a first-time homebuyer savings account. 
Notwithstanding the preceding sentence, any such account is 
subject to the taxes imposed by section 511 (relating to 
imposition of tax on unrelated business income of charitable, 
etc. organizations).
``(2) Account terminations.--
``(A) Acquisition of principal residence.--If the 
account beneficiary acquires an ownership interest in a 
principal residence--
``(i) each first-time homebuyer savings 
account of such beneficiary shall cease to be a 
first-time homebuyer savings account as of the 
close of the 60-day period beginning on the 
date of such acquisition, and
``(ii) the balance of such account as of 
such date shall be treated as distributed to 
such beneficiary.
``(B) Prohibited transactions, etc.--Rules similar 
to the rules of paragraphs (2) and (4) of section 
408(e) shall apply to any first-time homebuyer savings 
account, and any amounts treated as distributed under 
such rules shall be treated as not used to pay 
qualified home ownership expenses.
``(d) Tax Treatment of Distributions.--
``(1) Amounts used for qualified home ownership expenses.--
Any amount paid or distributed out of a first-time homebuyer 
savings account which is used exclusively to pay qualified home 
ownership expenses of any account beneficiary shall not be 
includible in gross income.
``(2) Inclusion of amounts not used for qualified home 
ownership expenses.--Any amount paid or distributed out of a 
first-time homebuyer savings account which is not used 
exclusively to pay the qualified home ownership 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 first-time 
homebuyer savings account of an individual, paragraph 
(2) shall not apply to distributions from the first-
time homebuyer 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 (other than a rollover contribution 
described in paragraph (5)) which is neither excludable 
from gross income under section 139J nor deductible 
under this section.
``(4) Additional tax for distributions not used for home 
ownership 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 first-time homebuyer 
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 made to the account 
beneficiary (or to the estate of such account 
beneficiary) on or after the death of such account 
beneficiary.
``(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 first-time 
homebuyer savings account to the account beneficiary to 
the extent the amount received is paid into a first-
time homebuyer 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 first-time homebuyer 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 
first-time homebuyer 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 home ownership expenses to the extent 
taken into account in determining the amount of the exclusion 
under paragraph (1).
``(e) Contribution Limit Adjustment.--
``(1) In general.--Except as provided in paragraph (2), in 
the case of any taxable year beginning after 2025, the 
Secretary, after consultation with the Secretary of Housing and 
Urban Development, shall adjust the State threshold amount for 
each State to reflect the median home price in each such State 
using the most recent data available to the Secretary.
``(2) Limit may not be lowered.--The adjustment described 
in paragraph (1) may only be used to increase the State 
threshold amount for a State.
``(f) Reports.--
``(1) In general.--The trustee of a first-time homebuyer 
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 (e)(5), the officer or 
employee having control of the first-time homebuyer savings 
account (or their designee) shall provide a report to the 
trustee of the first-time homebuyer 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 first-time homebuyer 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 Above the Line.--Section 62(a) of such Code 
is amended by inserting after paragraph (21) the following new 
paragraph:
``(22) First-time homebuyer savings accounts.--The 
deduction allowed by section 223A.''.
(c) Exclusions for Employer Contributions to First-Time Homebuyer 
Savings Accounts.--
(1) Exclusion from income tax.--
(A) In general.--Part III of subchapter B of 
chapter 1 of such Code is amended by inserting after 
section 139I the following new section:

``SEC. 139J. FIRST-TIME HOMEBUYER SAVINGS ACCOUNT CONTRIBUTIONS.

``In the case of an account beneficiary (as defined in section 
223A(c)(3)), gross income does not include amounts contributed by such 
account beneficiary's employer to any first-time homebuyer savings 
account (as defined in section 223A(c)(1)) of such account 
beneficiary.''.
(B) Clerical amendment.--The table of sections for 
part III of subchapter B of chapter 1 of such Code is 
amended by inserting after the item relating to section 
139I the following new item:

``Sec. 139J. First-time homebuyer savings account contributions.''.
(2) Exclusion from employment taxes.--
(A) Social security taxes.--
(i) In general.--Section 3121(a) is amended 
by striking ``or'' at the end of paragraph 
(22)(B), by striking the period at the end of 
paragraph (23) and inserting ``, or'', and by 
inserting after paragraph (23) the following 
new paragraph:
``(24) any payment made to or for the benefit of an 
employee if at the time of such payment it is reasonable to 
believe that the employee will be able to exclude such payment 
from income under section 139J.''.
(ii) Conforming amendment to social 
security act.--Section 209(a) of the Social 
Security Act is amended by striking ``or'' at 
the end of paragraph (19), by striking ``).'' 
at the end of paragraph (20) and inserting ``; 
or'', and by inserting after paragraph (20) the 
following new paragraph:
``(21) any reimbursement which is excludable from gross 
income under section 139J of the Internal Revenue Code of 
1986.''.
(B) Railroad retirement tax.--Section 3231(e) of 
such Code is amended by adding at the end the following 
new paragraph:
``(13) First-time homebuyer savings account 
contributions.--The term `compensation' shall not include any 
payment made to or for the benefit of an employee if at the 
time of such payment it is reasonable to believe that the 
employee will be able to exclude such payment from income under 
section 139J.''.
(C) Unemployment tax.--Section 3306(b) of such Code 
is amended by striking ``or'' at the end of paragraph 
(19)(B), by striking the period at the end of paragraph 
(20) and inserting ``; or'', and by inserting after 
paragraph (20) the following new paragraph:
``(21) any payment made to or for the benefit of an 
employee if at the time of such payment it is reasonable to 
believe that the employee will be able to exclude such payment 
from income under section 139J.''.
(D) Withholding tax.--Section 3401(a) of such Code 
is amended by striking ``or'' at the end of paragraph 
(22), by striking the period at the end of paragraph 
(23) and inserting ``; or'', and by inserting after 
paragraph (23) the following new paragraph:
``(24) any payment made to or for the benefit of an 
employee if at the time of such payment it is reasonable to 
believe that the employee will be able to exclude such payment 
from income under section 139J.''.
(3) Employer contributions required to be shown on w-2.--
Section 6051(a) of such Code is amended by striking ``and'' at 
the end of paragraph (16), by striking the period at the end of 
paragraph (17) and inserting ``, and'', and by inserting after 
paragraph (17) the following new paragraph:
``(18) the amount contributed to any first-time homebuyer 
savings account (as defined in section 223A(c)(1)) of such 
employee.''.
(d) Tax on Excess Contributions.--
(1) In general.--Section 4973(a) of such Code is amended by 
striking ``or'' at the end of paragraph (5), by inserting 
``or'' at the end of paragraph (6), and by inserting after 
paragraph (6) the following new paragraph:
``(7) a first-time homebuyer savings account (within the 
meaning of section 223A).''.
(2) Excess contribution.--Section 4973 of such Code is 
amended by adding at the end the following new subsection:
``(i) Excess Contributions to First-Time Homebuyer Savings 
Account.--For purposes of this section, in the case of first-time 
homebuyer savings accounts (as defined in section 223A), the term 
`excess contributions' means the sum of--
``(1) the aggregate amount contributed for the taxable year 
to first-time homebuyer savings accounts (other than a rollover 
contribution contributed under section 223A(e)(4) or (6)) which 
is neither excludable from gross income under section 139J nor 
allowable as a deduction under section 223A for such year, plus
``(2) the amount determined under this subsection for the 
preceding taxable year, reduced by the sum of--
``(A) the distribution out of the first-time 
homebuyer savings accounts which were included in gross 
income under section 223A(e)(1), plus
``(B) the excess (if any) of--
``(i) the maximum amount allowable as a 
deduction under section 223A(b) (determined 
without regard to section 139J) for the taxable 
year, over
``(ii) the amount contributed to first-time 
homebuyer savings accounts for the taxable 
year.
For purposes of this subsection, any contribution which 
is distributed out of the first-time homebuyer savings 
account in a distribution to which section 
223A(e)(4)(C) applies shall be treated as an amount not 
contributed.''.
(e) 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 first-time homebuyer savings 
accounts.--An individual for whose benefit a first-time 
homebuyer savings account (within the meaning of section 
223A(c)) 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 first-time homebuyer savings account by reason of the 
application of section 223(d)(2) 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 first-time homebuyer savings account 
described in section 223A(c).''.
(f) 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 first-time 
homebuyer savings accounts).''.
(g) 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(e)(2) (relating to additional 
tax on first-time homebuyer savings account not used 
for qualified home ownership expenses).''.
(2) Section 408(e)(2)(ii) of such Code is amended by 
inserting ``or to a first-time homebuyer savings account under 
section 223A(e)(7)'' before the period.
(3) Section 530(d)(9)(A)(ii) of such Code is amended by 
inserting ``, to a first-time homebuyer savings account under 
section 223A(e)(7),'' after ``section 408(e)(2)''.
(4) Section 877A of such Code is amended--
(A) in subsection (e)(2) by inserting ``a first-
time homebuyer 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),''.
(5) 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. First-time homebuyer savings account.''.
(h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2025.
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