# The American Dream Down Payment Act of 2021

This bill creates a new type of savings account specifically designed to help people save money for a down payment on their first home. Think of it as similar to a 529 college savings plan, but instead of education, the money goes toward buying a house.

Here's how it would work in practice: States would set up these programs, and anyone could open a "qualified down payment savings account" for themselves or for someone else (like a parent saving for their child). You'd contribute cash to the account, and the money would grow tax-free through investments. When you're ready to buy a home, you can withdraw the money without paying taxes on the earnings, as long as you use it for down payment costs and closing expenses on your first home purchase. The bill sets an initial limit of about $102,000 that can be saved in each account, with that limit adjusting upward for inflation each year.

The tax benefits are the main incentive here. Contributions to these accounts wouldn't be taxed as income, and the investment earnings would grow tax-free. If you withdraw money specifically for qualified down payment expenses, you won't owe taxes on those withdrawals. However, if you take money out for other reasons, you'd have to pay taxes on the earnings plus an extra 10 percent penalty—similar to early withdrawal penalties from retirement accounts. There are a few exceptions to this penalty, like if you become disabled or the account holder dies.

The bill also requires states to report regularly on how these programs are working, tracking things like how many people are using them, their income levels, and whether the programs are actually helping first-time homebuyers, particularly young people and those from communities with historically low homeownership rates. This data would help lawmakers understand whether the program is achieving its goal of making homeownership more accessible.

American Dream Down Payment Act of 2021

Meeks, Gregory W.

American Dream Down Payment Act of 2021 This bill establishes qualified down payment savings programs that allow taxpayers to establish tax-free accounts to save for down payments, including closing costs, on a principal residence. The Department of the Treasury, in coordination with the Securities and Exchange Commission, must report on matters relating to such accounts, including the number of states that have established down payment savings programs and information about beneficiaries of such programs.