Skill Savings Account Act

Summary#

This bill would add a new section to the federal tax code to create "skill savings accounts." These are trusts set up in the United States that employees and their employers can put cash into to pay for certain education and training costs. Contributions and distributions used only for qualifying education expenses would be excluded from the employee's taxable income, subject to limits and rules in the bill.

The bill defines an eligible employee as someone employed in the U.S. who is not claimed as a dependent. Employer contributions are excluded from income only up to an amount that generally equals $5,250 minus any amount already excluded under the existing employer education assistance rule. Employee contributions are excludable only up to $10,000 in a year when added together with other employee contributions. The bill sets rules for how accounts must be organized: cash-only contributions, a trustee that is a bank, insurance company, or approved person, no life insurance investments, nonforfeitable account balances, and limited commingling of assets.

Distributions used for qualified education expenses are tax-free. Distributions not used for qualified education expenses must be included in the beneficiary's taxable income, and a beneficiary under age 65 who takes such a nonqualified distribution would owe an additional 20 percent tax on the included amount. There are rules for returning excess contributions before the tax return due date to avoid some penalties. The accounts are generally tax-exempt but can be subject to the unrelated business income tax. The Treasury Department must issue implementing regulations within one year. The bill also changes another tax section to address excess contributions. The effective date is for taxable years beginning after December 31, 2025. The bill was introduced on May 7, 2026 by Representatives Glenn Thompson and Suzanne Bonamici and was referred to the House Committee on Ways and Means.

What it means for you#

  • Employees: You could put money into a skill savings account and, if you use it only for allowed education or training costs, that money would not count as taxable income, up to the limits the bill sets. If you take money out for other uses, that money becomes taxable and may face a 20% extra tax if you are under 65.
  • Employers: You may contribute to employees' accounts. Employer contributions are tax-excludable only up to the amount set by the bill (generally capped relative to existing employer education assistance exclusions).
  • Account rules: Accounts must be set up as specified trusts, with approved trustees and other administrative rules. Trustees may have reporting duties to the IRS and account holders.
  • Timing: The rules would apply for tax years starting after December 31, 2025, and Treasury must issue regulations within one year of enactment.

Expenses#

No publicly available information on budgetary costs or savings. The bill text sets contribution and tax-treatment rules but does not include an official cost estimate or a statement of projected fiscal impact.

Proponents' View#

No publicly available information.

Opponents' View#

No publicly available information.