First-Time Home Buyer Empowerment Act

This legislation amends the Internal Revenue Code to allow tax-free distributions from qualified tuition programs (529 plans) for first-time home purchases. The primary goal is to provide a new avenue for individuals to leverage their long-term educational savings to achieve homeownership. This creates a significant new benefit for beneficiaries who have maintained their 529 accounts over an extended period. To qualify for this tax-free treatment, the 529 account must have been established and maintained for at least 15 years prior to the distribution. The funds must be used within 60 days for the purchase of a principal residence by the designated beneficiary, who must be a first-time homebuyer . There is an aggregate lifetime limit of $35,000 per designated beneficiary for these distributions, which is coordinated with existing limits for Roth IRA rollovers. The bill includes a recapture provision to ensure the funds are used as intended; if the home is disposed of or ceases to be the principal residence within five years of purchase, the previously untaxed distribution becomes taxable, plus interest, with a phased reduction. Additionally, if a home purchase is delayed or canceled, funds can be re-contributed to a 529 or ABLE account within 120 days without penalty. These amendments will apply to distributions made in taxable years beginning after the date of the Act's enactment.