Week in Insights: 401(k) House-Buying Plan Is a Dubious Gamble

The Trump administration’s latest idea for addressing housing affordability may sound clever. But letting Americans use their 401(k)s penalty-free for down payments on homes is more like a booby trap than a panacea.

Retirement accounts are already underfunded because wages haven’t kept pace with the cost of living, and housing is unaffordable partially because demand outstrips supply. Connecting these two issues doesn’t resolve either; it will at best raise housing demand and at worst cause instability in both the housing and retirement spaces.

This proposal would bind personal retirement security to the real estate cycle even more tightly than it already is. If we learned one thing in 2008, it’s that housing markets don’t only ratchet up. Sometimes they drop—precipitously.

Think about this plan in practice. A worker pulls from their 401(k) to buy a house at the top of the market—the frustrating aspect being that you never know when you’re at the top. The market dips, their equity vanishes, their retirement savings are depleted, and the supposed wealth-building asset turns into a boondoggle.

The plan doesn’t just encourage personal gambles; it scales them up to the policy level. This sets up a potential cascade of failures between sectors. There is a real risk that instead of unlocking wealth, it will just rearrange scarcity.

While the plan might help some people get in the front door of a new home, it also increases the chances that they won’t be able to afford to stay—or retire—in it.

—Andrew Leahey

Homes in Palm Beach Gardens, Fla.

Photographer: Zak Bennett/Bloomberg via Getty Images

Welcome to the Week in Insights for Bloomberg Tax’s latest analysis and news commentary. This week, experts analyzed the Financial Accounting Standards Board’s most pressing tasks, the United Nations’ tax negotiations, and more.

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Insights

Bahrain’s Corporate Income Tax Plan Addresses Fiscal Challenges

Companies should begin preparing now for the introduction of a corporate income tax in Bahrain and consider potential restructurings and reorganizations.

SEC and IRS Enforcement Changes Are No Excuse for Lax Behavior

Auditors and accountants shouldn’t interpret the SEC’s decline in case volume as a relaxation of standards or equate fewer IRS audits with reduced compliance obligations.

Accounting Board Needs to Define Stablecoins, Clarify AI in 2026

The Financial Accounting Standards Board must prioritize settling three technical accounting areas to reduce investors’ risk at a time when cryptocurrencies and AI-aligned companies are volatile and difficult to understand.

Simplified Tax Models Obscure Risks and Liquidity in M&A Deals

Limitations, timing rules, and elections affect cash flow, especially in the first years after closing a deal. When these dynamics are ignored, models overstate liquidity and understate risk.

UN Tax Talks Call for Risk-Weighted Approach by Multinationals

Taxpayers should enhance international tax and transfer pricing planning to include scenario analyses cross-referencing their geographic footprint with potential unilateral or multilateral policy changes.

Canada Should Follow in US’ Footsteps on Pillar Two Carve-Out

Instead of shouldering Pillar Two’s burdens without enjoying material benefits, Canada should design its own side-by-side framework so that Canadian-headed groups can better compete with the US.

Columnist Corner

Technically Speaking design by Jonathan Hurtarte/Bloomberg Tax

The dismantling of the IRS’s partnership audit program could reduce the talent pool for future administrations to hire from, making the impact on federal audits irreversible, Andrew Leahey says in his latest Technically Speaking column.

“High-income, high-pass-through states should create or expand dedicated partnership units within their revenue departments” to function as a decentralized IRS replacement, Andrew writes, adding that states can collaborate on partnership audits like many already do on sales tax collection. Read More

News Roundup

IRS Leader Shake-Up Bleeds Criminal, Civil Enforcement Oversight

The line between tax auditors policing mere civil infractions versus serious tax crimes is blurring in the latest reorganization at the top of the IRS.

Hochul’s New York Budget Plan Sets Up Tax Fight With Mamdani

New York City Mayor Zohran Mamdani (D) reiterated his call for tax increases on businesses and high earners, opening a potential rift with Gov. Kathy Hochul (D) over her $260 billion budget plan.

Limited Partners Win Self-Employment Tax Battle, War Continues

Partners in investment funds and other partnerships have won a key court victory over whether they must pay Social Security and Medicare taxes. But the fight is far from over.

IRS Told Goldstein to Keep Better Gambling Records, Jury Hears

Tom Goldstein, the former US Supreme Court advocate facing federal tax and false statement charges, was educated years ago on his gambling-related tax obligations, jurors heard Thursday.

Tax Management Memorandum

AI Reshapes Software R&D Tax Credits, Eligibility Landscape

AI’s integration into software development challenges traditional R&D tax credit criteria, necessitating new frameworks for eligibility.

Career Moves

ArentFox Schiff Nabs Gould & Ratner’s Bley for Trusts in Chicago

Ilana Bley joined ArentFox Schiff as a partner in its private clients, trusts & estates practice in Chicago, the firm announced Thursday.