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[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6542 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 6542
To amend the Internal Revenue Code of 1986 to allow the establishment
of down payment savings accounts.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
December 9, 2025
Mr. Subramanyam (for himself, Mrs. Hinson, Mr. Thanedar, and Ms.
Norton) introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to allow the establishment
of down payment savings accounts.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``First Home Savings Opportunity Act
of 2025''.
SEC. 2. DOWN PAYMENT SAVINGS ACCOUNT.
(a) In General.--Part VII of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 is amended by inserting after section 223
the following new section:
``SEC. 223A. DOWN PAYMENT SAVINGS ACCOUNT.
``(a) Deduction Allowed.--In the case of an account beneficiary,
there shall be allowed as a deduction for the taxable year an amount
equal to the aggregate amount paid in cash during such taxable year by
such individual to a down payment savings account of such individual.
``(b) Definitions and Special Rules.--For purposes of this
section--
``(1) Down payment savings account.--The term `down payment
savings account' means a trust created or organized in the
United States exclusively for the purpose of paying the
qualified down payment expenses of the account beneficiary (and
designated as a down payment savings account at the time
created or organized), but only if the written governing
instrument creating the trust meets the following requirements:
``(A) No contribution will be accepted--
``(i) if such contribution is not made by
the account beneficiary,
``(ii) if the account beneficiary had an
ownership interest in a principal residence at
any time during the 3-year period ending on the
date of the contribution, or
``(iii) unless it is in cash.
``(B) The trustee is a bank (as defined in section
408(n)) or another person who demonstrates to the
satisfaction of the Secretary that the manner in which
that person will administer the trust will be
consistent with the requirements of this section.
``(C) No part of the trust assets will be invested
in life insurance contracts.
``(D) The assets of the trust shall not be
commingled with other property except in a common trust
fund or common investment fund.
``(E) The account beneficiary has attained the age
of 18.
``(2) Qualified down payment expenses.--The term `qualified
down payment expenses' means a down payment or closing costs
for the purchase of the principal residence of the account
beneficiary of a down payment savings account if such account
beneficiary is a first-time homebuyer (as defined in section
36(c)) with respect to such purchase.
``(3) Account beneficiary.--The term `account beneficiary'
means the individual on whose behalf the down payment savings
account is established.
``(4) Certain rules to apply.--Rules similar to the
following rules shall apply for purposes of this section:
``(A) Section 219(d)(2) (relating to no deduction
for rollovers).
``(B) Section 219(f)(3) (relating to time when
contributions deemed made).
``(C) Section 219(f)(5) (relating to employer
payments).
``(D) Section 408(g) (relating to community
property laws).
``(5) Principal residence.--The term `principal residence'
has the same meaning as when used in section 121.
``(c) Limitations.--
``(1) Contribution limit.--The amount allowable as a
deduction under subsection (a) to any individual for any
taxable year shall not exceed the lesser of--
``(A) the taxpayer's earned income (as defined in
section 32(c)(2)) for the taxable year, or
``(B) $10,000 ($20,000 in the case of a joint
return).
``(2) Phaseout based on modified adjusted gross income.--
``(A) In general.--The deduction allowable under
subsection (a) shall be reduced by an amount which
bears the same ratio to the amount of such deduction
as--
``(i) the excess (if any) of--
``(I) the taxpayer's modified
adjusted gross income, over
``(II) $150,000 ($236,000 in the
case of a joint return), bears to
``(ii) $50,000 ($79,000 in the case of a
joint return).
``(B) Modified adjusted gross income.--For purposes
of subparagraph (A), the term `modified adjusted gross
income' means the adjusted gross income of the taxpayer
for the taxable year increased by any amount excluded
from gross income under section 911, 931, or 933.
``(3) Denial of deduction to dependents.--No deduction
shall be allowed under this section to any individual with
respect to whom a deduction under section 151 is allowable to
another taxpayer for a taxable year beginning in the calendar
year in which such individual's taxable year begins.
``(4) Inflation adjustment.--
``(A) In general.--In the case of any taxable year
beginning after 2025, each of the dollar amounts in
this subsection shall be increased by an amount equal
to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment
determined under section 1(f)(3) for the
calendar year in which the taxable year begins,
determined by substituting `calendar year 2024'
for `calendar year 2016' in subparagraph
(A)(ii) thereof.
``(B) Rounding.--If any increase under paragraph
(1) is not a multiple of $100, such increase shall be
rounded to the nearest multiple of $100.
``(d) Tax Treatment of Distributions.--
``(1) Amounts used for qualified down payment expenses.--
Any amount paid or distributed out of a down payment savings
account which is used exclusively to pay qualified down payment
expenses of any account beneficiary shall not be includible in
gross income.
``(2) Inclusion of amounts not used for qualified down
payment expenses.--Any amount paid or distributed out of a down
payment savings account which is not used exclusively to pay
the qualified down payment expenses of the account beneficiary
shall be included in the gross income of such beneficiary.
``(3) Excess contributions returned before due date of
return.--
``(A) In general.--If any excess contribution is
contributed for a taxable year to any down payment
savings account of an individual, paragraph (2) shall
not apply to distributions from the down payment
savings accounts of such individual (to the extent such
distributions do not exceed the aggregate excess
contributions to all such accounts of such individual
for such year) if--
``(i) such distribution is received by the
individual on or before the last day prescribed
by law (including extensions of time) for
filing such individual's return for such
taxable year, and
``(ii) such distribution is accompanied by
the amount of net income attributable to such
excess contribution.
Any net income described in clause (ii) shall be
included in the gross income of the individual for the
taxable year in which it is received.
``(B) Excess contribution.--For purposes of
subparagraph (A), the term `excess contribution' means
any contribution to a down payment savings account
(other than a rollover contribution described in
paragraph (5)) which is not deductible under this
section.
``(4) Additional tax for distributions not used for down
payment expenses.--
``(A) In general.--The tax imposed by this chapter
for any taxable year on any taxpayer who receives a
payment or distribution from a down payment savings
account which is includible in gross income shall be
increased by 20 percent of the amount which is so
includible.
``(B) Exceptions.--Subparagraph (A) shall not apply
if the payment or distribution is--
``(i) made to the account beneficiary (or
to the estate of such account beneficiary) on
or after the death of such account beneficiary,
or
``(ii) attributable to such account
beneficiary's being disabled (within the
meaning of section 72(m)(7)).
``(5) Rollover contribution.--An amount is described in
this paragraph as a rollover contribution if it meets the
following requirements:
``(A) In general.--Paragraph (2) shall not apply to
any amount paid or distributed from a down payment
savings account to the account beneficiary to the
extent the amount received is paid into a down payment
savings account for the benefit of such beneficiary not
later than the 60th day after the day on which the
beneficiary receives the payment or distribution.
``(B) Limitation.--This paragraph shall not apply
to any amount described in subparagraph (A) received by
an individual from a down payment savings account if,
at any time during the 1-year period ending on the day
of such receipt, such individual received any other
amount described in subparagraph (A) from a down
payment savings account which was not includible in the
individual's gross income because of the application of
this paragraph.
``(6) Special rules for death and divorce.--Rules similar
to the rules of paragraphs (7) and (8) of section 223(f) shall
apply for purposes of this section.
``(7) Disallowance of excluded amounts as deduction,
credit, or exclusion.--No deduction, credit, or exclusion shall
be allowed to the taxpayer under any other section of this
chapter for any qualified down payment expenses to the extent
taken into account in determining the amount of the exclusion
under paragraph (1).
``(8) Account termination.--Rules similar to the rules of
paragraphs (2) and (4) of section 408(e) shall apply to down
payment savings accounts, and any amount treated as distributed
under such rules shall be treated as not used to pay qualified
down payment expenses.
``(e) Reports.--
``(1) In general.--The trustee of a down payment savings
account shall make such reports regarding such account to the
Secretary and to the account beneficiary with respect to
contributions, distributions, and such other matters as the
Secretary may require. The reports required by this subsection
shall be filed at such time and in such manner and furnished to
such individuals at such time and in such manner as may be
required.
``(2) Rollover distributions.--In the case of any
distribution described in subsection (d)(5), the officer or
employee having control of the down payment savings account (or
their designee) shall provide a report to the trustee of the
down payment savings account to which the distribution is made.
Such report shall be filed at such time and in such manner as
the Secretary may require and shall include information with
respect to the contributions, distributions, and earnings of
the down payment savings account as of the date of the
distribution described in such subsection, together with such
other matters as the Secretary may require.''.
(b) Deduction Allowed to Non-Itemizers.--Section 63(b) of such Code
is amended--
(1) in paragraph (6), by striking ``and'' and inserting a
comma,
(2) in paragraph (7), by striking the period at the end and
inserting ``, and'', and
(3) by adding at the end the following new paragraph:
``(8) the deduction allowed by section 223A.''.
(c) Tax on Prohibited Transactions.--
(1) Section 4975(c) of such Code is amended by adding at
the end the following new paragraph:
``(8) Special rule for down payment savings accounts.--An
individual for whose benefit a down payment savings account
(within the meaning of section 223A(b)(1)) is established shall
be exempt from the tax imposed by this section with respect to
any transaction concerning such account (which would otherwise
be taxable under this section) if, with respect to such
transaction, the account ceases to be a down payment savings
account by reason of the application of section 223(c)(8) to
such account.''.
(2) Section 4975(e)(1) of such Code is amended by striking
``or'' at the end of subparagraph (F), by redesignating
subparagraph (G) as subparagraph (H), and by inserting after
subparagraph (F) the following new subparagraph:
``(G) a down payment savings account described in
section 223A(b)(1).''.
(d) Penalty for Failure To File Reports.--Section 6693(a)(2) of
such Code is amended by striking ``and'' at the end of subparagraph
(E), by striking the period at the end of subparagraph (F) and
inserting ``, and'', and by inserting after subparagraph (F) the
following new subparagraph:
``(G) Section 223A(g) (relating to down payment
savings accounts).''.
(e) Conforming Amendments.--
(1) Section 26(b)(2) of such Code is amended by striking
``and'' at the end of subparagraph (Y), by striking the period
at the end of subparagraph (Z) and inserting ``, and'', and by
inserting after subparagraph (Z) the following new
subparagraph:
``(AA) section 223A(c)(2) (relating to additional
tax on down payment savings account not used for
qualified down payment expenses).''.
(2) Section 877A of such Code is amended--
(A) in subsection (e)(2) by inserting ``a down
payment savings account (as defined in section 223A),''
after ``section 223),'', and
(B) in subsection (g)(6) by inserting
``223(e)(4),'', after ``529A(c)(3),''.
(3) The table of sections for part VII of subchapter B of
chapter 1 of such Code is amended by inserting after the item
relating to section 223 the following new item:
``Sec. 223A. Down payment savings account.''.
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2025.
<all>
Introduced in House
Sponsor introductory remarks on measure. (CR H5062)
Introduced in House
Referred to the House Committee on Ways and Means.
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