First-Time Home Buyer Empowerment Act

This bill proposes to amend the Internal Revenue Code of 1986, allowing for tax-free distributions from qualified tuition programs (529 plans) to be used by designated beneficiaries for the purchase of their first principal residence. To be eligible, the 529 plan must have been established and maintained for a minimum of 15 years prior to the distribution date. Furthermore, the funds must be utilized within 60 days of distribution for the purchase of a principal residence by a first-time homebuyer. There is an aggregate lifetime limit of $35,000 on such distributions per designated beneficiary, which is coordinated with other special distribution rules. The legislation also includes a recapture provision , where the tax benefit is reversed if the home is sold or no longer serves as the principal residence within five years of purchase, though the recapture amount decreases annually. If a home purchase is delayed or canceled, the distributed funds can be recontributed to a 529 plan or ABLE account within 120 days to avoid taxation.