Sponsors (4)
The bill broadens tax-advantaged use of 529 plans to lower startup costs for certain entrepreneurs and students but creates industry-based unequal access, raises potential revenue loss, and adds compliance complexity.
Students, young entrepreneurs, and families can use 529 plan funds tax-free to buy depreciable business equipment (excluding buildings) for qualifying NAICS-listed trades, lowering startup costs and making 529s more flexible for career-starting tools.
All taxpayers may face reduced federal tax revenue if 529 withdrawals for business equipment are used at scale, potentially shifting costs onto other taxpayers.
Taxpayers and entrepreneurs whose businesses fall outside the specific enumerated NAICS codes are treated unequally because they cannot access the same 529-funded benefits.
Beneficiaries who use 529 funds for business equipment will face more complex recordkeeping and IRS compliance burdens to demonstrate equipment qualifies and is used in covered NAICS activities.
Based on analysis of 2 sections of legislative text.
Permits 529 plan funds to pay for depreciable tangible business property (not buildings) used by the beneficiary in specified NAICS-coded trades, treating those purchases as qualified 529 expenses.
Adds a new allowable use for 529 college savings plans so a designated beneficiary can use plan funds to buy certain business equipment used in specified trades. The change defines “qualified business trade expenses” as depreciable tangible property (but not buildings) that the beneficiary uses in enumerated NAICS-coded trade fields. The new rule applies for taxable years beginning after the date of enactment and requires 529 plan administrators and taxpayers to treat these business property purchases as a type of qualified higher education expense under section 529.
Introduced January 28, 2025 by Marie Gluesenkamp Perez · Last progress January 28, 2025