First Home Savings Opportunity Act of 2025

Tax Deductions for Savings: Individuals can claim a deduction for the amount of cash they pay into a down payment savings account during the taxable year (Section 223A(a)).

Tax-Free Distributions for Homebuyers: Amounts distributed from the account that are used exclusively for qualified down payment expenses, such as a down payment or closing costs for a first-s-time homebuyer, are not included in gross income (Section 223A(d)(1) and Section 223A(b)(2)).

Support for Non-Itemizers: The bill amends the code to allow the deduction for those who do not itemize their deductions (Section 2(b)).

Income-Based Adjustments: The bill includes a provision to increase dollar amounts for deductions and limits based on cost-of-living adjustments for years after 2025 (Section 223A(c)(4)).

Contribution Limits: The deduction is capped at the lesser of the taxpayer's earned income or $10,000 ($20,000 for joint returns), which may limit the benefit for those saving larger amounts (Section 223A(c)(1)).

Income Phaseouts: The ability to take the deduction is reduced for individuals with modified adjusted gross income exceeding certain thresholds, specifically $150,000 for individuals or $236,000 for joint returns (Section 223A(c)(2)).

Penalties on Misused Funds: If money is distributed from the account and is not used exclusively for qualified down payment expenses, it must be included in the beneficiary's gross income, and the taxpayer may face an additional tax of 20 percent (Section 223A(d)(2) and Section 223A(d)(4)).

Strict Eligibility Requirements: To qualify for the account, the beneficiary must be at least 18 years old and must not have had an ownership interest in a principal residence during the 3-year period ending on the date of the contribution (Section 223A(b)(1)).