To amend the Internal Revenue Code of 1986 to provide for the establishment of, and the deduction of contributions to, housing savings accounts to be used by first-time homebuyers.

Amends the Internal Revenue Code to allow an income tax deduction for up to $4,000 of cash contributions to a housing savings account established for the benefit of the taxpayer for the exclusive purpose of purchasing the taxpayer's first principal residence. Limits total deductions to $15,000. Prohibits an individual from being a beneficiary of more than one account. Requires contributions to be made for five consecutive taxable years.

Excludes account distributions from gross income if they are used exclusively for the purchase of a first principal residence.

Imposes penalties in the form of additional taxes on excess contributions to an account or when account funds or distributions are used for other than the legitimate purposes for which the account was established.

Requires the account trustee to report to the Secretary of the Treasury and to the account's beneficiary on the maintenance of the account. Imposes a penalty for failure to file required reports.

Exempts an account from taxation (except for the tax on unrelated business income of a charitable organization), unless the beneficiary engages in specified prohibited transactions in connection with it.