The Homeownership Savings Act: Explained

Overview: Homeownership Savings Act

The Homeownership Savings Act creates tax-advantaged savings accounts specifically designed for future home purchases. The bill allows buyers to save money in dedicated accounts where funds grow tax-free and withdrawals for qualified homebuying expenses are not taxed.

This legislation addresses one of the biggest barriers to homeownership: accumulating enough money for a down payment and closing costs. By providing tax benefits for homebuying savings, the bill makes it easier for buyers to reach their savings goals and purchase homes.

The bill was introduced in the House of Representatives on May 7, 2026, and has been referred to the House Committee on Ways and Means for consideration.

Note that bills often change on their way to becoming law, so this page will update as new details emerge. For real-time updates, subscribe to our newsletter.

What is the Homeownership Savings Act?

The Homeownership Savings Act establishes a new type of tax-advantaged savings account designed specifically for homebuying. These accounts work similarly to other tax-preferred savings vehicles like Roth IRAs, but the funds must be used for qualified home purchase expenses.

Here's how homeownership savings accounts work: You contribute money that you've already paid taxes on (after-tax dollars). The money grows tax-free while it sits in the account. When you're ready to buy a home, you can withdraw both your contributions and any growth without paying additional taxes, as long as the funds are used for qualified homebuying expenses.

This tax treatment makes homeownership savings accounts more efficient than regular savings accounts for accumulating a down payment. In a regular savings account, you pay taxes on interest earned each year. With a homeownership savings account, all growth is tax-free.

Qualified Home Purchase Expenses

The bill defines qualified expenses that can be paid with homeownership savings account funds. These include down payments, closing costs, and other expenses directly related to purchasing a home. The specific list of qualified expenses will be detailed in the final legislation and IRS guidance.

You can use homeownership savings account funds to purchase any type of residential property, including single-family homes, condos, townhomes, and manufactured homes, as long as you will use the property as your primary residence.

Who Benefits from the Homeownership Savings Act?

The Homeownership Savings Act benefits anyone who wants to save money for a future home purchase. The accounts are particularly valuable for buyers who need time to accumulate a down payment and want their savings to grow more efficiently.

First-Time Home Buyers

First-time buyers often need several years to save for a down payment. Homeownership savings accounts help these buyers by allowing their savings to grow tax-free during the accumulation period. This can significantly reduce the time needed to reach down payment goals.

Current Homeowners Planning to Move

Existing homeowners who want to move up to a larger home or relocate to a different area can also benefit. These buyers may need to save additional funds beyond their current home's equity to afford their next purchase.

Young Adults Starting Their Careers

Young professionals who know they want to buy a home eventually can start contributing to homeownership savings accounts early in their careers. The tax-free growth over many years can result in substantial savings.

The accounts work best for buyers who have a timeline of at least a few years before purchasing. The longer the money stays in the account, the more benefit you get from tax-free growth.

How Homeownership Savings Accounts Work

Homeownership savings accounts function as dedicated savings vehicles with special tax treatment. You open an account with a qualified financial institution, make contributions with after-tax money, and the funds grow tax-free until you're ready to buy a home.

Opening an Account

You can open a homeownership savings account with banks, credit unions, investment companies, and other financial institutions that choose to offer these accounts. The process is similar to opening other types of investment or savings accounts.

Making Contributions

You contribute money that you've already paid income taxes on. The bill establishes annual contribution limits, similar to IRA contribution limits. You can make contributions throughout the year or in lump sums, depending on your financial situation.

Investment Options

Like other tax-advantaged accounts, homeownership savings accounts can hold various types of investments. You might choose conservative options like savings accounts or CDs if you plan to buy soon, or growth investments like mutual funds if you have a longer timeline.

Using the Funds

When you're ready to buy a home, you can withdraw funds to pay for qualified expenses. Withdrawals for qualified home purchases are tax-free, including both your original contributions and any investment growth. The funds can be used for down payments, closing costs, and other approved homebuying expenses.

If you withdraw money for non-qualified expenses, you may face penalties and taxes on the growth, similar to early withdrawals from retirement accounts.

Who Sponsors the Homeownership Savings Act?

The Homeownership Savings Act was introduced in the House of Representatives and referred to the House Committee on Ways and Means, which handles tax legislation. The bill addresses housing affordability by making it easier for Americans to save for homeownership through tax-advantaged accounts.

For the latest legislative updates and cosponsors, see the Bill Tracker above.