Unlocking Homeownership Act

This legislation amends the Internal Revenue Code of 1986 to allow distributions from qualified tuition programs (529 plans) to be used for first-time home purchases without incurring tax penalties. It introduces a new category, "qualified first-time homebuyer distribution," which permits funds to be withdrawn and used within 120 days for qualified acquisition costs of a principal residence. These distributions can benefit the designated beneficiary, their spouse, or their children, grandchildren, or ancestors. A "first-time homebuyer" is defined as an individual who, along with their spouse, has not held a present ownership interest in a principal residence during the two-year period preceding the acquisition date. The bill also includes special provisions for situations where a home purchase is delayed or canceled, allowing funds to be transferred to another qualified tuition program or ABLE account with an extended 120-day window. Furthermore, it permits recontributions of qualified distributions back into a 529 plan or ABLE account if the home purchase in a qualified disaster area was disrupted by a declared disaster.