A bill to amend the Internal Revenue Code of 1954 to provide for the establishment of, and the deduction of contributions to, housing savings accounts.

Amends the Internal Revenue Code to allow an income tax deduction for contributions of cash or securities made to a savings account created or organized for the benefit of the taxpayer (or the taxpayer and spouse if married) for the exclusive purpose of purchasing the taxpayer's first principal residence. Limits the maximum annual deduction to $1,500 ($3,000 in the case of married individuals filing a joint return), with a maximum lifetime deduction of $15,000 ($30,000 in the case of married individuals filing a joint return). Provides for an annual inflation adjustment of such amounts. Sets forth the requirements for the establishment of an individual housing account.

Excludes distributions from a housing account from gross income as long as they are used exclusively for the purchase of a first principal residence. Exempts interest earned on an individual housing account from income taxation. Imposes a ten percent surtax on distributions from an individual housing account which are not used for the purchase of a principal residence. Prohibits contributions to an individual housing account in excess of prescribed limits and imposes a tax on such excess contributions equal to the tax on excess contributions to an individual retirement account. Requires the trustee of an individual housing account to make such reports regarding the maintenance of the account as the Secretary of the Treasury may require.

Requires the reduction of the basis of any residence acquired with funds withdrawn from an individual housing account in an amount equal to the funds withdrawn. Requires the reduction of the $125,000 one-time exclusion from gross income of the proceeds from the sale of a principal residence by a taxpayer 55 years of age or older if such residence had been purchased with distributions from an individual housing account. Limits the amount of such reduction to the amount of any such distribution excluded from gross income.