Allowance of distributions from qualified tuition programs for qualified housing expenses

(a) In general Section 529(c)(3) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph: (F) Distributions for qualified housing expenses (i) In general Subparagraph (A) shall not apply to that portion of any distribution which is used to pay for a qualified housing expense of the designated beneficiary. (ii) Qualified housing expense For purposes of this subparagraph, the term qualified housing expense, with respect to a designated beneficiary, means any expense incurred by such beneficiary for the purchase of a principal residence, but only if such beneficiary is a first-time homebuyer, and includes any closing costs and mortgage payments incurred with respect to such purchase. (iii) Other definitions For purposes of this subparagraph— (I) First-time homebuyer The term first-time homebuyer means any individual if such individual (and if married, such individual’s spouse) had no present ownership interest in a principal residence during the 3-year period ending on the date of the purchase of the principal residence to which this subparagraph applies. (II) Principal residence The term principal residence has the same meaning as when used in section 121. (III) Purchase The term purchase has the meaning given such term in section 36(c).. (b) Effective date The amendment made by this section shall apply to distributions made after December 31, 2026.