H.R. 7468: First-Time Home Buyer Empowerment Act

This bill, titled the First-Time Home Buyer Empowerment Act, aims to amend the Internal Revenue Code to facilitate the use of funds from long-term qualified tuition programs for first-time home purchases. Here’s a breakdown of its main provisions:

Qualifications for Distribution

The bill allows designated beneficiaries of qualified tuition programs to withdraw funds for purchasing a principal residence under certain conditions:

• The tuition program must have been maintained for at least 15 years.
• Withdrawn amounts cannot exceed the total contributions made to the program plus earnings, as long as these were made at least five years prior to the withdrawal.
• Funds must be used for a principal residence within 60 days after the distribution.

Aggregate Limitation

There are limits on the amount that can be withdrawn from these programs for home purchases:

• Withdrawals cannot exceed a total of $35,000 for the designated beneficiary, which will be reduced by any previous withdrawals for the same purpose in the same or prior years.

Delayed Purchases

If the purchase of the home is delayed, beneficiaries are allowed to reinvest the withdrawn funds back into a qualified tuition program or an ABLE account (a savings account for individuals with disabilities) within 120 days, rather than the 60-day limit which typically applies.

Tax Implications

If the beneficiary does not meet the requirements for the home purchase, there may be tax consequences:

• If a qualifying event occurs (such as selling the house) before five years after the distribution, the beneficiary may have to pay taxes on the withdrawn amount.
• The tax amount will be increased by a certain calculation based on the time elapsed since the withdrawal, with reductions applying for each year since the purchase was made.

Definitions

The bill defines "purchase," "principal residence," and "first-time homebuyer" according to existing legal definitions. This ensures clarity regarding who qualifies for the benefits proposed in the legislation.

Effective Date

The provisions of this bill will apply to distributions made in taxable years that start after the bill is enacted.

Relevant Companies

• PHM - PulteGroup, Inc.: As a homebuilder, changes in first-time homebuyer financing could impact demand for new homes.
• DHI - D.R. Horton, Inc.: Another major homebuilder that may see changes in purchasing trends due to new funding sources for first-time buyers.
• KBH - KB Home: Homebuilders like KB Home could be affected by increased access to funds for first-time home purchases, which might boost their sales.