H.R. 8709

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 8709 Introduced in House (IH)]

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119th CONGRESS
2d Session
H. R. 8709

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

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

May 7, 2026

Ms. Stevens 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 homeownership 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 ``Homeownership Savings Act''.

SEC. 2. HOMEOWNERSHIP 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. HOMEOWNERSHIP 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 homeownership savings account of 
such individual.
``(b) Limitations.--
``(1) Annual dollar limitation.--The amount allowable as a 
deduction under subsection (a) to an individual for the taxable 
year shall not exceed--
``(A) $3,000 in the case of a joint return,
``(B) $2,500 in the case of a head of household, or
``(C) $2,000 in the case of any other individual.
``(2) Limitation based on earned income.--
``(A) In general.--The amount allowable as a 
deduction under subsection (a) shall not exceed such 
individual's earned income for the taxable year.
``(B) Special rule for joint returns.--In the case 
of an individual whose earned income is less than the 
earned income of such individual's spouse and files a 
joint return for the taxable year, the amount allowable 
as a deduction under subsection (a) shall not exceed 
the excess (if any) of--
``(i) the earned income of the taxpayer for 
such taxable year, over
``(ii) the deduction allowable under 
subsection (a) to such individual's spouse for 
such taxable year.
``(C) Earned income.--For purposes of this 
paragraph, the term `earned income' has the meaning 
given such term in section 32(c)(2).
``(3) Limitation based on modified adjusted gross income.--
``(A) In general.--The maximum amount that may 
otherwise be allowable as a deduction under subsection 
(a) shall be reduced (but not below zero) by an amount 
which bears the same ratio to such maximum amount as--
``(i) in the case of a joint return--
``(I) the excess (if any) of the 
modified adjusted gross income of the 
account beneficiary for such taxable 
year over $242,000, bears to
``(II) $10,000,
``(ii) in the case of a head of household--
``(I) the excess (if any) of the 
modified adjusted gross income of the 
account beneficiary for such taxable 
year over $200,000, bears to
``(II) $20,000, or
``(iii) in the case of any other 
individual--
``(I) the excess (if any) of the 
modified adjusted gross income of the 
account beneficiary for such taxable 
year over $153,000, bears to
``(II) $15,000.
``(B) Modified adjusted gross income.--For purposes 
of this paragraph, 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.
``(4) Denial of deduction to dependants.--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.
``(c) Definitions and Special Rules.--For purposes of this 
section--
``(1) Homeownership savings account.--The term 
`homeownership savings account' means a trust created or 
organized in the United States exclusively for the purpose of 
paying the qualified homeownership expenses of the account 
beneficiary (and designated as a homeownership 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 would result in 
lifetime aggregate contributions to the account 
exceeding $40,000,
``(ii) unless it is in cash, or
``(iii) if such account beneficiary has not 
made the certification required under 
subparagraph (F).
``(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.
``(F) The account beneficiary certifies, under 
penalty of perjury, at the time that the account is 
established that such account beneficiary would be a 
first-time homebuyer with respect to a purchase of a 
principal residence on the date of such establishment.
``(2) Qualified homeownership expenses.--The term 
`qualified homeownership expenses' means a down payment or 
closing costs relating to the purchase of the primary residence 
of the account beneficiary of a homeownership savings account 
if such account beneficiary is a first-time homebuyer.
``(3) No contribution for individual who is not a first-
time homebuyer.--In the case of an individual who would not be 
a first-time homebuyer with respect to a purchase of a 
principal residence on the date of any contribution to a 
homeownership savings account, paragraph (1)(A)(i) shall be 
applied by substituting `$0' for `$40,000'.
``(4) First-time homebuyer.--The term `first-time 
homebuyer' means an individual if--
``(A) such individual is a first-time homebuyer (as 
defined in section 36(c)(1)), and
``(B) such individual has never purchased a 
residential property using an amount which was excluded 
from the gross income of such individual by reason of 
subsection (e)(1).
``(5) Account beneficiary.--The term `account beneficiary' 
means the individual on whose behalf the homeownership savings 
account is established.
``(6) 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).
``(d) Tax Treatment of Accounts.--
``(1) In general.--A homeownership savings account is 
exempt from taxation under this subtitle unless such account 
has ceased to be a homeownership 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 homeownership savings account of 
such beneficiary shall cease to be a 
homeownership 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 homeownership savings 
account, and any amounts treated as distributed under 
such rules shall be treated as not used to pay 
qualified homeownership expenses.
``(e) Tax Treatment of Distributions.--
``(1) Amounts used for qualified homeownership expenses.--
Any amount paid or distributed out of a homeownership savings 
account which is used exclusively to pay qualified 
homeownership expenses of any account beneficiary shall not be 
includible in gross income.
``(2) Inclusion of amounts not used for qualified 
homeownership expenses.--Any amount paid or distributed out of 
a homeownership savings account which is not used exclusively 
to pay the qualified homeownership 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 homeownership 
savings account of an individual, paragraph (2) shall 
not apply to distributions from the homeownership 
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 if--
``(i) after such contribution, the 
aggregate contribution to homeownership savings 
accounts of the account beneficiary exceeds the 
amount in effect under subsection (c)(1)(A)(i), 
or
``(ii) if the amount of such contribution 
is not allowable as a deduction by reason of 
paragraph (2)(A) or (3)(a) of subsection (b).
``(4) Additional tax for distributions not used for 
homeownership 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 homeownership 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 homeownership 
savings account to the account beneficiary to the 
extent the amount received is paid into a homeownership 
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 homeownership 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 
homeownership 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 homeownership expenses to the extent 
taken into account in determining the amount of the exclusion 
under paragraph (1).
``(f) Salary Reduction Prohibited.--No employer shall directly 
reduce the wages or salary of an employee by reason of a contribution 
made by such employer to a homeownership savings account on behalf of 
such employee.
``(g) Inflation Adjustment.--
``(1) In general.--In the case of any taxable year 
beginning after 2026, the dollar amounts in subsection (b) 
shall be increased by an amount equal to--
``(A) such dollar amount, multiplied by
``(B) 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 (ii) thereof.
``(2) Rounding.--If any increase under paragraph (1) is not 
a multiple of $100, such increase shall be rounded to the 
nearest multiple of $100.
``(h) Reports.--
``(1) In general.--The trustee of a homeownership 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.
``(2) Rollover distributions.--In the case of any 
distribution described in subsection (e)(5), the officer or 
employee having control of the homeownership savings account 
(or their designee) shall provide a report to the trustee of 
the homeownership savings account to which the distribution is 
made. Such report shall include information with respect to the 
contributions, distributions, and earnings of the homeownership 
savings account as of the date of the distribution described in 
such subsection, together with such other matters as the 
Secretary may require.
``(3) Time and manner.--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 the Secretary determines appropriate.''.
(b) Deduction Allowed Above the Line.--Section 62(a) of such Code 
is amended by inserting after paragraph (21) the following new 
paragraph:
``(22) Homeownership savings accounts.--The deduction 
allowed by section 223A.''.
(c) Exclusions for Employer Contributions to Homeownership 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. HOMEOWNERSHIP SAVINGS ACCOUNT CONTRIBUTIONS.

``In the case of an account beneficiary (as defined in section 
223A(c)(5)), gross income does not include amounts contributed by such 
account beneficiary's employer to any homeownership savings account (as 
defined in section 223A(c)(1)) of such account beneficiary if such 
contribution, taken in aggregate with all other contributions in all 
taxable years to homeownership savings accounts (as so defined) of such 
beneficiary, does not exceed the amount in effect under section 
223A(c)(1)(A)(i).''.
(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. Homeownership savings account contributions.''.
(2) Exclusion from employment taxes.--
(A) Social security taxes.--
(i) In general.--Section 3121(a) of such 
Code 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) Homeownership 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 homeownership 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 homeownership 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 Homeownership Savings Account.--
``(1) In general.--For purposes of this section, in the 
case of homeownership savings accounts (as defined in section 
223A), the term `excess contributions' means the sum of--
``(A) the amount of any excess contribution (as 
defined in section 223A(e)(3)(B) for the taxable year, 
plus
``(B) the excess (if any) of--
``(i) the amount determined under this 
subsection for the preceding taxable year, over
``(ii) the distribution out of the 
homeownership savings accounts which were 
included in gross income under section 
223A(e)(1) during the taxable year.

``(2) Treatment of returned excess contributions.--For 
purposes of this subsection, any contribution which is 
distributed out of the homeownership savings account in a 
distribution to which section 223A(e)(3)(A) 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 homeownership savings accounts.--An 
individual for whose benefit a homeownership savings account 
(within the meaning of section 223A(c)(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 homeownership savings 
account by reason of the application of section 223A(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 homeownership 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(h) (relating to homeownership 
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 homeownership savings account not used for 
qualified homeownership expenses).''.
(2) Section 408(e)(2)(ii) of such Code is amended by 
inserting ``or to a homeownership 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 homeownership 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 
homeownership savings account (as defined in section 
223A),'' after ``section 223),'', and
(B) in subsection (g)(6) by inserting 
``223A(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. Homeownership savings account.''.
(h) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2026.
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