First-Time Homebuyer Savings Act of 2026

The "First-Time Homebuyer Savings Act of 2026" introduces a new type of tax-advantaged savings vehicle called a First-Time Homebuyer Savings Account (FTHSA) . This bill aims to assist eligible individuals in saving for the purchase or construction of their first principal residence by allowing for tax-deductible contributions. Individuals who have not owned a residential property in the preceding three years, along with their spouses, qualify as eligible individuals. They can contribute up to $10,000 annually in cash to an FTHSA, with an Adjusted Gross Income (AGI) limit of $200,000 ($400,000 for joint filers) for the deduction. These accounts are structured as trusts and must be managed by approved financial institutions. Funds distributed from an FTHSA are tax-free if used for qualified homebuyer expenses, which include costs associated with purchasing or constructing a principal residence. However, distributions not used for these qualified expenses are included in gross income and subject to a 10% penalty, unless they are rollover contributions or transfers to an IRA. After acquiring a home, beneficiaries have a limited window to transfer remaining FTHSA funds to an IRA without penalty.