American Dream Accounts Act of 2026

The "American Dream Accounts Act of 2026" proposes to amend the Internal Revenue Code to establish new tax-exempt American dream accounts . These accounts are designed to help eligible U.S. citizens save specifically for a qualified first-time home purchase . Contributions to these trusts must be in cash and are subject to annual limits of $7,500, or $10,000 for beneficiaries aged 35 or older, with a lifetime aggregate contribution cap of $250,000 across all accounts for a single beneficiary. Distributions from an American dream account are generally taxable, but qualified first-time homebuyer distributions are exempt from taxation up to $500,000. A special rule applies if the home is acquired jointly with another American dream account beneficiary, limiting the tax-free amount to $250,000. To maintain tax-free status, the acquired principal residence must be held for at least three years, with exceptions for events like death, disability, or job changes. Non-qualified distributions are subject to a 10% additional tax, though exceptions exist for distributions made due to the beneficiary's death or disability. The bill also outlines provisions for rollover contributions , allowing transfers to another American dream account for the same beneficiary (with a 12-month restriction), to an account for a family member, or to a Roth IRA, each with specific limitations. Trustees are required to report contributions and distributions, and penalties are imposed for excess contributions and prohibited transactions, with the act taking effect for taxable years beginning after December 31, 2026.