Congress lets workers raid retirement accounts tax-free for home purchases
H.R. 7185 — Home Savings Act · Filed by John McGuire (R-VA) · 5 cosponsors · Introduced Jan 21, 2026 · Referred to committee
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What it does
This bill allows workers to withdraw money from retirement accounts (401(k)s, IRAs, 403(b)s, and 457 plans) without paying income tax on those withdrawals, as long as the money is used for a down payment or closing costs on a home purchase. The benefit applies to the worker, their spouse, or their relatives (children, grandchildren, parents). The tax break expires after December 31, 2030.
Why we flagged it
The bill's core mechanism is a temporary tax exclusion for retirement withdrawals used in home purchases. It is straightforward tax policy aimed at reducing barriers to homeownership, not a hidden carve-out or immunity grant.
What the text implies
- The provision may disproportionately benefit higher-income workers with larger retirement savings, since only those with substantial 401(k) or IRA balances can use this withdrawal option effectively.
- By allowing tax-free withdrawals for home purchases, the bill reduces lifetime retirement savings for participating workers, potentially increasing future reliance on Social Security or other retirement income sources.
The full analysis lists 4 implications of this text.
Who stands to gain
homebuyers and prospective homeowners; real estate and mortgage lending sectors (indirect, through increased home purchase demand)