A bill to amend the Internal Revenue Code of 1954 with respect to the exemption from Federal income tax of interest paid on certain family farm homestead bonds.

Amends the Internal Revenue Code to exclude from gross income interest on qualified State-issued family farm homestead bonds, all of the proceeds of which are to be used to provide the acquisition of land or other property (including a principal residence) to be used for farming purposes.

Limits financing under an approved State family farm homestead plan to families whose average income during the preceding five years is 115 percent or less of the median family income of the county of residence. Requires at least one member of the family to participate materially in the operation of the farm on a full-time basis. Prohibits any family member from owning any land which is used, or is capable of being used, for farming purposes. Limits: (1) the aggregate amount of financing made available to any family to a maximum of $250,000; (2) and the total number of acres which may be purchased from bond proceeds by any family to a maximum 160 acres.

Directs the Secretary of Agriculture to establish annually for each State the maximum aggregate amount of obligations issuable. Directs the Farmers Home Administration to provide management and other financial assistance to States and individuals participating in any homestead plan.