Summary#
This bill would add a new type of tax-exempt savings account called an "American dream account." The accounts are trusts or custodial accounts held by a bank or approved trustee for the exclusive benefit of a beneficiary who must be a U.S. citizen. Contributions must be in cash and are limited each year and over a lifetime. Qualified distributions used to buy a first home for a first-time homebuyer can be tax-free under rules in the bill. Other distributions are generally taxable and may face an additional 10% tax unless the distribution is for death or disability. The bill sets rules for rollovers, trustee duties, reporting to the IRS, prohibited transactions, and penalties for excess contributions. The rules would apply to taxable years beginning after December 31, 2026.
What it means for you#
- Who can open an account: any U.S. citizen (the bill calls this an "eligible individual").
- Contribution limits: annual contributions are generally limited to $7,500, or $10,000 for beneficiaries age 35 or older (catch-up). There is also a lifetime cap tied to a $250,000 figure reduced by prior contributions. Certain rollovers are not counted against those limits.
- Qualified home purchase distributions: an amount used as a qualified first-time homebuyer distribution can be excluded from income, subject to a lifetime dollar limit of $500,000 (or $250,000 in some joint-acquisition cases) and a one-time lifetime use rule for the beneficiary.
- Holding requirement: if the home bought with the account money is sold before 3 years after acquisition, the tax exclusion may be reversed and the amount included in income, with listed exceptions such as death, divorce, or certain job changes.
- Rollovers and transfers: the bill allows 60-day rollovers to another American dream account for the same beneficiary, to an account for a family member, or to a Roth IRA for the same beneficiary, subject to timing, trustee-to-trustee rules, and other limits.
- Trustees and reporting: trustees must meet standards, keep account assets separate, require an annual attestation from beneficiaries about other accounts, and report contributions and distributions to the IRS and beneficiaries.
- Penalties: a 10% additional tax applies to distributions included in income (except for death or disability). Excess contributions are subject to rules and taxes similar to other tax-preferred accounts.
Expenses#
No publicly available information on federal cost estimates or revenue effects is included in the bill text or metadata provided.
Proponents' View#
No publicly available information on supporters' statements or arguments is included in the bill text or metadata provided.
Opponents' View#
No publicly available information on opponents' statements or arguments is included in the bill text or metadata provided.