Overview: First Time Homeowner Savings Plan Act of 2025
| Bill Number | Chamber | Sponsor | Date Introduced |
|---|---|---|---|
| H.R.2748 | House | Rep. Haley Stevens (D-MI-11) | April 8, 2025 |
The First Time Homeowner Savings Plan Act of 2025 is a bill that increases how much money a first-time home buyer can withdraw from their IRA to use for a down payment. The bill raises the limit from $10,000 to $25,000, with future increases tied to the rate of inflation.
The bill was introduced in the current Congress (119th) on April 8, 2025, in the House of Representatives by Rep. Haley Stevens (D-MI-11).
Only about 4% of bills become law, according to FactCheck.org. This article reviews what the Act proposes and how it compares to current law.
Note that bills often change before becoming law. This page will update as new details emerge. For real-time updates about this and other first-time homebuyer programs, subscribe to our newsletter.
Bill Overview
First Time Homeowner Savings Plan Act
A bill to increase the IRA penalty-free withdrawal limit for first-time homebuyers from $10,000 to $25,000 and to index that limit for inflation.
Bill Overview
First Time Homeowner Savings Plan Act
A bill to increase the IRA penalty-free withdrawal limit for first-time homebuyers from $10,000 to $25,000 and to index that limit for inflation.
Official Title as Introduced
A bill to amend the Internal Revenue Code of 1986 to increase the dollar limitation on distributions from individual retirement plans for first-time homebuyers.
House of Representatives
What Does the First Time Homeowner Savings Plan Act of 2025 Do?
The First Time Homeowner Savings Plan Act updates the rules for taking money from your IRA to buy your first home.
An IRA (Individual Retirement Account) is a tax-advantaged savings and investment account. You put money into an IRA during your working years where it grows tax-free, and money is typically withdrawn in retirement to be used for income.
Tax law allow investors to take money out of their IRA at any time, but withdrawals before age 59½ face two specific costs:
- Regular income tax at your federal income tax rate
- A 10% tax penalty on monies withdraen
The government makes exceptions to its early withdrawal penalties, and one of them is for buying a first home.
In 1997, Congress passed a law that allows first-time home buyers to take up to $10,000 from their IRA with taxes due on the withdrawal, but without the accompanying 10% penalty. This was a huge tax relief because, in 1997, the median home sale price was $121,900.
That was almost 30 years ago!
Today, the median home sale price exceeds $400,000 and the original $10,000 tax exclusion feels almost quaint. The First Time Homeowner Savings Plan Act modernizes the law. It raises the penalty-free withdrawal limit to $25,000, and updates it annually to keep pace with inflation.
Current IRA Withdrawal Limits vs. Proposed Changes
| Year | Current Withdrawal Limit | Proposed Withdrawal Limit |
|---|---|---|
| 2025 | $10,000 | $10,000 |
| 2026 | $10,000 | $25,000 |
| 2027 | $10,000 | $25,750 |
| 2028 | $10,000 | $26,500 |
Who Qualifies For The First Time Homeowner Savings Plan Act?
The First Time Homeowner Savings Plan Act is different from other first-time home buyer bills because of its simplicity.
Unlike the $15,000 First-Time Home Buyer Tax Credit Act and The HELPER Act, which enforce income limits or occupational requirements, the First Time Homeowner Savings Plan Act's only requirement is that buyers are first-timers.
There are no geographic restrictions, special paperwork, or requirements to use a conventional mortgage. The First Time Homeowner Savings Plan Act is simple and accessible.
Must be a first-time home buyer
All first-time home buyers are eligible to use the First Time Homeowner Savings Plan Act, where "first-time homebuyer" is any person who has not owned a home or co-signed on a residential mortgage within 2 years of purchase. This is a different timeframe from the standard first-time home buyer definition used by lenders, which puts the lookback period at 36 months.
Reference: Who qualifies as a first-time home buyer
| Situation | First-Time Buyer? |
|---|---|
| Never owned a home | Yes |
| Hasn't owned a home in the last 2 years | Yes |
| Owned a home within the last 2 years | No |
| Only owned commercial property (not residential) | Yes |
| Inherited a home but did not live in it as a primary residence | Yes |
| Owned a vacation home within the last 2 years | No |
| Partial owner in a timeshare | Yes |
| Owns an investment property | Yes |
Funds must be used for qualified acquisition costs within 120 days
Home buyers using the First Time Homeowner Savings Plan Act must use their IRA withdrawals for qualified acquisition costs only, and within 120 days of withdrawal.
Qualified acquisition costs include down payment, origination fees, discount points, title insurance, home inspection fees, appraisal fees, and more. IRA money can also be used for construction costs and land purchases linked to buying or rebuilding a home.
The bill does not allow for money to be used for moving expenses, furniture, appliances, home improvements after purchase, property taxes, or homeowners insurance.
Reference: Allowable Uses for IRA Funds Under the First Time Homeowner Savings Plan Act
| Expense Type | Allowable? | Example Uses |
|---|---|---|
| Closing costs | Yes | Title insurance, escrow fees, attorney fees |
| Construction costs | Yes | Building or rebuilding a home |
| Down payment | Yes | Funds applied directly to the home's purchase price |
| Home appraisal | Yes | Appraisal fee required by lender |
| Home inspection | Yes | Pre-purchase inspection costs |
| Land purchase for building a home | Yes | Buying land to build a primary residence |
| Loan origination fees | Yes | Lender charges for processing the mortgage |
| Settlement fees | Yes | Recording fees, transfer taxes |
| Furniture and appliances | No | Sofas, beds, refrigerators, washers/dryers |
| Home improvements after purchase | No | Renovations, remodeling, landscaping |
| Homeowners insurance | No | Insurance premiums for the property |
| Moving expenses | No | Hiring movers, truck rental |
| Property taxes | No | Annual or monthly property tax payments |
The $25,000 limit is lifetime per individual
The $25,000 withdrawal limit is a lifetime cap per individual. Once you use the full amount, you cannot take additional penalty-free withdrawals for future home purchases.
If you're married and both spouses qualify as first-time homebuyers, each spouse can withdraw up to $25,000 from their own IRA accounts. This means a married couple could potentially access $50,000 total for their home purchase.
The limit applies to the individual, not the account. If you have multiple IRAs, the $25,000 cap is shared across all of them. You cannot withdraw $25,000 from each IRA you own.
Reference: How the $25,000 Lifetime Limit Works
| Scenario | Total Available | Notes |
|---|---|---|
| Single, one IRA | $25,000 | Max from one account |
| Single, multiple IRAs | $25,000 | Limit applies across all accounts |
| Married, both qualify | $50,000 | $25,000 per spouse |
| Married, one qualifies | $25,000 | Only qualifying spouse withdraws |
| Previously withdrew $15,000 | $10,000 | $10,000 left of lifetime limit |
| Previously withdrew $25,000 | $0 | No more penalty-free withdrawals |
Who Sponsors the First Time Homeowner Savings Plan Act in Congress?
The bill was introduced in the House of Representatives on April 8, 2025, by Rep. Haley Stevens (D-MI-11).
It was referred to the House Committee on Ways and Means. No cosponsors are currently listed.
For the latest legislative updates, see the Bill Tracker above.
Frequently Asked Questions About the First Time Homeowner Savings Plan Act
Get answers to common questions about the proposed First Time Homeowner Savings Plan Act, including the new $25,000 IRA withdrawal cap and how inflation indexing works.
What is the First Time Homeowner Savings Plan Act of 2025?
The bill raises the IRA first-time homebuyer penalty-free withdrawal limit from $10,000 to $25,000 and indexes it for inflation starting in 2027. Unlike other first-time homebuyer bills, this Act has no income limits or occupational requirements.
Who qualifies as a first-time homebuyer under this Act?
The Act uses the standard tax code definition. A first-time homebuyer is someone who has not owned a principal residence within the last two years. This is different from how mortgage lenders define first-time home buyer.
When would the new $25,000 limit apply?
The higher cap applies to distributions made after December 31, 2025. The $25,000 limit is a lifetime cap per individual, not per account or per home purchase.
How does the inflation indexing work?
Starting with tax years that begin after 2026, the $25,000 limit is adjusted annually based on inflation and rounded to the nearest $100. This ensures the limit keeps up with rising home prices.
What can I use the IRA funds for?
Funds must be used for qualified acquisition costs within 120 days of withdrawal, including down payments, closing costs, settlement fees, title insurance, home inspection fees, appraisal fees, and loan origination fees. You cannot use the money for moving expenses, furniture, appliances, or home improvements after purchase.
Can married couples withdraw more than $25,000?
Yes. If both spouses qualify as first-time homebuyers, each can withdraw up to $25,000 from their own IRA accounts, giving the couple access to $50,000 total for their home purchase.
What is the current law without this bill?
Currently, individuals may withdraw up to $10,000 from an IRA penalty-free for qualified first-time homebuyer expenses. Amounts above that are generally subject to the 10% early withdrawal penalty.
Does this bill affect Roth and Traditional IRAs differently?
No. The bill only changes the penalty-free withdrawal cap. Normal tax rules for Roth and Traditional IRAs continue to apply. Taxpayers should consult a tax professional about their situation.
