American Dream Accounts Act of 2026

The bill introduces American Dream Accounts (ADAs), which are tax-exempt trusts established for the exclusive benefit of eligible U.S. citizens to save for a first-time home purchase. These accounts permit annual cash contributions, with a limit of $7,500 per year, increasing to $10,000 for beneficiaries aged 35 or older. A lifetime contribution cap of $250,000 applies across all ADAs for a single beneficiary, and the trustee must be a bank or an approved entity.

While general distributions from an ADA are taxable, qualified first-time homebuyer distributions are exempt from gross income. These tax-free distributions are capped at $500,000, or $250,000 if the home is jointly acquired with another ADA beneficiary. To maintain this tax-free status, the acquired principal residence must be held for at least three years, though exceptions apply for specific life events such as death, divorce, or certain employment changes. Non-qualified distributions are subject to a 10% additional tax.

The legislation also allows for rollovers between ADAs for the same beneficiary or a family member, and permits transfers to a Roth IRA, all subject to specific annual and lifetime limits. Trustees are mandated to report contributions and distributions to the Secretary and the beneficiary. Penalties are imposed for excess contributions to ensure adherence to the established limits and account rules.