ACE Act

This bill expands how families can use 529 education savings. It lets 529 money pay for more K–12 and homeschool costs, like curriculum, books, online materials, tutoring by qualified, non‑related instructors, test fees, dual enrollment, and therapies for students with disabilities. It also raises the yearly cap on 529 money for K–12 and homeschool expenses to $20,000.

It adds a tax break for gifts to 529 plans by increasing the annual gift tax exclusion by up to $20,000 when the gift goes into a beneficiary’s 529 plan. The bill also limits the tax break for interest on state and local bonds to places that adopt school choice laws; states that meet stronger benchmarks keep the full break, while others may get only a 50% break on interest until they meet higher targets.

Key points

• Who is affected: Families using 529 plans (including homeschoolers), students with disabilities, people who give money to 529 plans, and states/localities that issue bonds.
• What changes: More K–12 and homeschool expenses qualify for tax‑free 529 withdrawals; the K–12 cap rises to $20,000; gifts to 529s get up to an extra $20,000 excluded from gift taxes; tax‑free bond interest is limited to states with school choice programs that meet set goals (some states may get only 50% of the interest tax‑free).
• When: The new 529 uses apply to withdrawals after the bill becomes law; the higher K–12 cap and the gift‑tax change apply starting in 2025; the bond rule applies to bonds issued after the bill becomes law.