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Introduced January 28, 2025 by Marie Gluesenkamp Perez · Last progress January 28, 2025
The bill expands tax-free 529 use to lower start-up costs and add flexibility for certain students and entrepreneurs, but it narrows eligibility by industry, risks reduced tax revenue, and adds compliance burdens.
Students and young entrepreneurs can use 529 funds tax-free to buy qualifying depreciable business equipment (excluding buildings), lowering start-up costs for trades covered by the listed NAICS codes.
Families and savers gain more flexible, tax-advantaged options because 529 plans can be used for career-starting tools in specified industries, increasing the plans' usefulness beyond traditional education expenses.
All taxpayers could face reduced federal tax revenue if 529 withdrawals for business equipment are used widely, potentially shifting tax burdens or reducing funding for government programs.
Taxpayers and entrepreneurs outside the specifically enumerated NAICS codes cannot use 529 funds for similar business equipment, creating unequal treatment based on industry classification that disadvantages some businesses.
Beneficiaries who use 529 funds for business equipment face added recordkeeping and IRS compliance complexity to prove equipment qualifies and is used in covered NAICS activities, increasing administrative burden and audit risk.
Based on analysis of 2 sections of legislative text.
Permits 529 plan distributions to pay for certain depreciable business equipment (excluding buildings) used by beneficiaries in specified trade fields.
Adds a new type of qualified expense to 529 college savings plans so beneficiaries can use plan distributions to buy certain business equipment for work in specified trade fields. The equipment must be tangible property that is depreciable (buildings excluded) and used by the beneficiary in one of the listed NAICS trade fields. The change applies to expenses paid in taxable years beginning after enactment.