Introduced in House — H.R. 7422

119th CONGRESS

2d Session

H. R. 7422

IN THE HOUSE OF REPRESENTATIVES

February 9, 2026

Mrs. Cammack (for herself and Mr. Moylan) 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 first-time homebuyer savings accounts.

Section 1. Short title

This Act may be cited as the Next-Generation Equity Savings Tool Act or the NEST Act.

Sec. 2. First-time homebuyer 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:

223A. First-time homebuyer 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 or on behalf of such individual to a first-time homebuyer savings account of such individual.
(b) Definitions and special rules
For purposes of this section—
(1) First-time homebuyer savings account
The term first-time homebuyer savings account means a trust created or organized in the United States exclusively for the purpose of paying the qualified home ownership expenses of the account beneficiary (and designated as a first-time homebuyer 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 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,
(ii)
if such contribution would result in lifetime aggregate contributions to the account exceeding the State threshold amount,
(iii)
unless it is in cash, or
(iv)
except in the case of rollover contributions, if such contribution would result in aggregate contributions to the account for the taxable year exceeding the amount in effect under subsection (b)(1)(B).
(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) State threshold amount
The term State threshold amount means 20 percent of the median home sale price in the State in which such account is established.
(3) Qualified home ownership expenses
The term qualified home ownership expenses means costs to acquire, construct, or reconstruct a residence, including a down payment, financing, or other closing costs relating to the purchase, if such residence is the primary residence of the account beneficiary of a first-time homebuyer savings account and such account beneficiary is a first-time homebuyer (as defined in section 36(c)) with respect to such purchase.
(4) Account beneficiary
The term account beneficiary means the individual on whose behalf the first-time homebuyer savings account is established.
(5) 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).
(c) Tax treatment of accounts
(1) In general
A first-time homebuyer savings account is exempt from taxation under this subtitle unless such account has ceased to be a first-time homebuyer savings account. Notwithstanding the preceding sentence, any such account is subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc. organizations).
(2) Account terminations
(A) Acquisition of principal residence
If the account beneficiary acquires an ownership interest in a principal residence—
(i)
each first-time homebuyer savings account of such beneficiary shall cease to be a first-time homebuyer savings account as of the close of the 60-day period beginning on the date of such acquisition, and
(ii)
the balance of such account as of such date shall be treated as distributed to such beneficiary.
(B) Prohibited transactions, etc
Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to any first-time homebuyer savings account, and any amounts treated as distributed under such rules shall be treated as not used to pay qualified home ownership expenses.
(d) Tax treatment of distributions
(1) Amounts used for qualified home ownership expenses
Any amount paid or distributed out of a first-time homebuyer savings account which is used exclusively to pay qualified home ownership expenses of any account beneficiary shall not be includible in gross income.
(2) Inclusion of amounts not used for qualified home ownership expenses
Any amount paid or distributed out of a first-time homebuyer savings account which is not used exclusively to pay the qualified home ownership 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 first-time homebuyer savings account of an individual, paragraph (2) shall not apply to distributions from the first-time homebuyer 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 (other than a rollover contribution described in paragraph (5)) which is neither excludable from gross income under section 139J nor deductible under this section.
(4) Additional tax for distributions not used for home ownership 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 first-time homebuyer 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 made to the account beneficiary (or to the estate of such account beneficiary) on or after the death of such account beneficiary.
(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 first-time homebuyer savings account to the account beneficiary to the extent the amount received is paid into a first-time homebuyer 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 first-time homebuyer 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 first-time homebuyer 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 home ownership expenses to the extent taken into account in determining the amount of the exclusion under paragraph (1).
(e) Contribution limit adjustment
(1) In general
Except as provided in paragraph (2), in the case of any taxable year beginning after 2025, the Secretary, after consultation with the Secretary of Housing and Urban Development, shall adjust the State threshold amount for each State to reflect the median home price in each such State using the most recent data available to the Secretary.
(2) Limit may not be lowered
The adjustment described in paragraph (1) may only be used to increase the State threshold amount for a State.
(f) Reports
(1) In general
The trustee of a first-time homebuyer 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 (e)(5), the officer or employee having control of the first-time homebuyer savings account (or their designee) shall provide a report to the trustee of the first-time homebuyer 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 first-time homebuyer 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 above the line

Section 62(a) of such Code is amended by inserting after paragraph (21) the following new paragraph:

(22) First-time homebuyer savings accounts
The deduction allowed by section 223A.

(c) Exclusions for employer contributions to first-Time homebuyer savings accounts

(1) Exclusion from income tax

(A) In general

Part III of subchapter B of chapter 1 of such Code is amended by inserting after section 139I the following new section:

139J. First-time homebuyer savings account contributions
In the case of an account beneficiary (as defined in section 223A(c)(3)), gross income does not include amounts contributed by such account beneficiary’s employer to any first-time homebuyer savings account (as defined in section 223A(c)(1)) of such account beneficiary.

(B) Clerical amendment

The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 139I the following new item:

Sec. 139J. First-time homebuyer savings account contributions.

(2) Exclusion from employment taxes

(A) Social security taxes

(i) In general

Section 3121(a) is amended by striking or at the end of paragraph (22)(B), by striking the period at the end of paragraph (23) and inserting , or, and by inserting after paragraph (23) the following new paragraph:

(24)
any payment made to or for the benefit of an employee if at the time of such payment it is reasonable to believe that the employee will be able to exclude such payment from income under section 139J.

(ii) Conforming amendment to Social Security Act

Section 209(a) of the Social Security Act is amended by striking or at the end of paragraph (19), by striking ). at the end of paragraph (20) and inserting ; or, and by inserting after paragraph (20) the following new paragraph:

(21)
any reimbursement which is excludable from gross income under section 139J of the Internal Revenue Code of 1986.

(B) Railroad retirement tax

Section 3231(e) of such Code is amended by adding at the end the following new paragraph:

(13) First-time homebuyer savings account contributions
The term ‘compensation’ shall not include any payment made to or for the benefit of an employee if at the time of such payment it is reasonable to believe that the employee will be able to exclude such payment from income under section 139J.

(C) Unemployment tax

Section 3306(b) of such Code is amended by striking or at the end of paragraph (19)(B), by striking the period at the end of paragraph (20) and inserting ; or, and by inserting after paragraph (20) the following new paragraph:

(21)
any payment made to or for the benefit of an employee if at the time of such payment it is reasonable to believe that the employee will be able to exclude such payment from income under section 139J.

(D) Withholding tax

Section 3401(a) of such Code is amended by striking or at the end of paragraph (22), by striking the period at the end of paragraph (23) and inserting ; or, and by inserting after paragraph (23) the following new paragraph:

(24)
any payment made to or for the benefit of an employee if at the time of such payment it is reasonable to believe that the employee will be able to exclude such payment from income under section 139J.

(3) Employer contributions required to be shown on W–2

Section 6051(a) of such Code is amended by striking and at the end of paragraph (16), by striking the period at the end of paragraph (17) and inserting , and, and by inserting after paragraph (17) the following new paragraph:

(18)
the amount contributed to any first-time homebuyer savings account (as defined in section 223A(c)(1)) of such employee.

(d) Tax on excess contributions

(1) In general

Section 4973(a) of such Code is amended by striking or at the end of paragraph (5), by inserting or at the end of paragraph (6), and by inserting after paragraph (6) the following new paragraph:

(7)
a first-time homebuyer savings account (within the meaning of section 223A).

(2) Excess contribution

Section 4973 of such Code is amended by adding at the end the following new subsection:

(i) Excess contributions to first-Time homebuyer savings account
For purposes of this section, in the case of first-time homebuyer savings accounts (as defined in section 223A), the term excess contributions means the sum of—
(1)
the aggregate amount contributed for the taxable year to first-time homebuyer savings accounts (other than a rollover contribution contributed under section 223A(e)(4) or (6)) which is neither excludable from gross income under section 139J nor allowable as a deduction under section 223A for such year, plus
(2)
the amount determined under this subsection for the preceding taxable year, reduced by the sum of—
(A)
the distribution out of the first-time homebuyer savings accounts which were included in gross income under section 223A(e)(1), plus
(B)
the excess (if any) of—
(i)
the maximum amount allowable as a deduction under section 223A(b) (determined without regard to section 139J) for the taxable year, over
(ii)
the amount contributed to first-time homebuyer savings accounts for the taxable year.
For purposes of this subsection, any contribution which is distributed out of the first-time homebuyer savings account in a distribution to which section 223A(e)(4)(C) applies shall be treated as an amount not contributed.

(e) 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 first-time homebuyer savings accounts
An individual for whose benefit a first-time homebuyer savings account (within the meaning of section 223A(c)) 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 first-time homebuyer savings account by reason of the application of section 223(d)(2) 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 first-time homebuyer savings account described in section 223A(c).

(f) 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 first-time homebuyer savings accounts).

(g) 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(e)(2) (relating to additional tax on first-time homebuyer savings account not used for qualified home ownership expenses).

(2)

Section 408(e)(2)(ii) of such Code is amended by inserting or to a first-time homebuyer savings account under section 223A(e)(7) before the period.

(3)

Section 530(d)(9)(A)(ii) of such Code is amended by inserting , to a first-time homebuyer savings account under section 223A(e)(7), after section 408(e)(2).

(4)

Section 877A of such Code is amended—

(A)

in subsection (e)(2) by inserting a first-time homebuyer 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),.

(5)

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. First-time homebuyer savings account.

(h) Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2025.