Summary#
This bill renames Coverdell education savings accounts to "Coverdell lifelong learning accounts" and changes how those accounts can be used. It lets money in these accounts pay for a range of job training and adult education services, transportation and testing tied to that training, and computers and internet when used for training. The bill raises ages and contribution limits: contributions may continue for older beneficiaries (raising the age limit for contributions), and it raises the annual limit for beneficiaries over age 30. It adds rules about account balances and when beneficiaries can be changed after age 30. The bill also creates a new employer tax credit equal to 25% of nonelective employer contributions to an employee's account, allows adult designated beneficiaries to deduct their own contributions, and increases the additional tax on certain nonqualified distributions.
What it means for you#
- If you are a student or worker: Starting in 2026, money in a Coverdell lifelong learning account can pay for approved workforce training, career and technical programs, adult education, youth workforce activities, related transportation and required testing, and computers or internet used for that training. Those items must be tied to the listed programs and providers in federal workforce and adult education laws.
- If you are an account beneficiary: Contributions may be made for beneficiaries past age 18 and up to higher ages set by the bill. Beneficiaries who are age 30 or older face different annual contribution limits and account-change rules.
- If you are an employer: You may be eligible for a federal tax credit (25% of nonelective contributions) when you make nonelective contributions to a covered employee's account. Some very small categories of owners and closely related individuals are excluded from the definition of eligible employees for the credit.
- If you contribute to your own account as an adult beneficiary: The bill allows a deduction for contributions you make to an account for which you are the designated beneficiary (subject to rules in the bill).
Expenses#
No publicly available information on estimated federal budget effects. The bill includes provisions that would affect federal tax revenues and taxpayer behavior, including:
- a 25% general business tax credit for certain nonelective employer contributions to employees' accounts;
- a new deduction for contributions made by adult beneficiaries to their own accounts;
- changes to contribution limits (including a higher per-year limit for beneficiaries over age 30) and age rules;
- an increase in the additional tax on certain nonqualified distributions from 10% to 20%.
Proponents' View#
No publicly available information.
Opponents' View#
No publicly available information.