To amend the Internal Revenue Code of 1986 to allow a deduction for amounts contributed to home savings accounts, and for other purposes.
- Sponsor
- Rep. Perry, Scott [R-PA-10]
- Committees
- Ways and Means Committee (primary)
- Last action
- Jun 25, 2026
Bottom line
This bill creates tax-deductible home savings accounts to encourage and facilitate homeownership by providing a tax incentive for individuals to save for a principal residence or pay down their mortgage.
What it actually does
This bill establishes a new tax-advantaged savings vehicle called a "home savings account" (HSA), allowing individuals to deduct up to $10,000 ($20,000 for joint filers) annually for cash contributions. Funds within an HSA grow tax-free and can be withdrawn tax-free if used for qualified housing expenses, such as purchasing a principal residence or making excess principal payments on acquisition indebtedness. Non-qualified withdrawals are subject to income tax and a 20% penalty, with exceptions for disability or death. The bill also permits a one-time, tax-free rollover from an Individual Retirement Plan (IRA) to an HSA.
Proponents argue
Supporters argue this bill would make homeownership more accessible and affordable, especially for first-time homebuyers, by providing a direct tax incentive to save for a down payment or to accelerate mortgage principal payments. They contend it encourages financial discipline and helps individuals build wealth through real estate, aligning with the American dream of homeownership.
Opponents contend
Opponents might argue that this deduction primarily benefits higher-income individuals who can afford to save the maximum amount, potentially exacerbating wealth inequality rather than broadly addressing housing affordability. They may also raise concerns about the potential for significant federal revenue loss, which could impact other government programs or contribute to the national debt.
The bill is relatively concise and its core provisions are understandable, making it accessible for a reader to evaluate within a reasonable timeframe.
Section 1(a), new Section 214(a), (b), (c)
Establishment of Home Savings Accounts and Contribution Deduction
This provision creates "Home Savings Accounts" (HSAs) as tax-advantaged trusts specifically for qualified housing expenses. Individuals can deduct cash contributions made to their HSA, up to an annual limit of $10,000 for individuals or $20,000 for married individuals filing jointly. No deduction is allowed for dependents. HSAs must be held by a qualified trustee (like a bank), cannot invest in life insurance, and their assets generally cannot be commingled with other property.
Supporters argue
Supporters contend this deduction directly incentivizes saving for homeownership, making it more attainable for many Americans by reducing the effective cost of saving and allowing funds to grow tax-free.
Critics contend
Critics might argue that the deduction disproportionately benefits higher-income earners who have disposable income to contribute, thus not effectively addressing housing affordability for lower-income individuals.
Tradeoffs
This provision balances the goal of promoting homeownership and individual wealth building with the cost to federal tax revenue and potential equity concerns regarding who benefits most from tax deductions.
Section 1(a), new Section 214(e)
Tax-Free Withdrawals for Qualified Housing Expenses and Penalties for Non-Qualified Use
Amounts distributed from an HSA are not included in gross income if they are used exclusively for "qualified housing expenses." These expenses include purchasing a principal residence for the beneficiary or making excess principal payments on acquisition indebtedness for that residence. Distributions not used for these qualified purposes are included in gross income and are subject to an additional 20% tax, unless the distribution is made after the account beneficiary becomes disabled or dies. The bill also allows for rollover contributions to another HSA once every 12 months.
Section 1(c), new Section 408(d)(10)
One-Time Tax-Free Rollover from IRAs to HSAs
This provision allows individuals to make a one-time, tax-free, direct trustee-to-trustee transfer from an Individual Retirement Plan (IRA) to a Home Savings Account (HSA). The amount transferred cannot exceed the annual HSA contribution limit ($10,000 or $20,000 for joint filers). This election is irrevocable and can only be made once in an individual's lifetime, providing a mechanism to repurpose retirement savings for homeownership without immediate tax consequences.
The annual contribution limits for Home Savings Accounts ($10,000 for individuals, $20,000 for joint filers) will be adjusted for inflation starting after December 31, 2027. These adjustments will be based on the cost-of-living adjustment determined under section 1(f)(3) of the Internal Revenue Code, using calendar year 2026 as the base year, and rounded to the nearest $100.
Section 1(f), new Section 214(f)
Why it matters:This is standard legislative practice for technical adjustments to dollar amounts in the tax code, ensuring that the real value of the deduction is maintained over time without requiring new legislation.
Case for: Proponents argue that inflation adjustments are essential to ensure the deduction's effectiveness is not eroded by rising costs over time, thereby maintaining the incentive for home savings.
Case against: No specific opposition is typically raised against inflation adjustments themselves, as they are generally seen as a technical correction. However, some might argue that any increase in the deduction limit, even inflation-adjusted, further increases potential revenue loss.
Estimated impact: This provision will gradually increase the federal tax expenditure associated with HSAs over time, in line with inflation, by allowing for higher deductible contributions.
This amendment exempts an individual from the tax on prohibited transactions (e.g., self-dealing, using the account as collateral) with respect to their Home Savings Account if the account ceases to be an HSA due to certain termination rules similar to those for Individual Retirement Accounts (IRAs) under Section 408(e)(2) and (4). This clarifies that when an account is terminated for misuse, the general prohibited transaction tax may not apply in addition to the account termination rules.
Section 1(e)(1), new Section 4975(c)(8)
Why it matters:This is standard legislative practice for integrating new account types into existing tax enforcement frameworks, ensuring consistency and clarity in how penalties for misuse are applied across different tax-advantaged accounts.
Case for: Proponents argue this clarification ensures a consistent and fair application of tax rules when an HSA is misused, preventing double penalties and aligning HSA treatment with established IRA regulations.
Case against: No specific opposition is typically raised against this provision, as it is a technical clarification designed to ensure consistency and avoid unintended consequences within the tax code.
Estimated impact: This provision has minimal direct fiscal impact; its primary effect is to clarify enforcement procedures and tax liability in specific scenarios of HSA misuse or termination.