Sponsors (4)
The bill expands tax-free 529 plan use to buy qualifying business equipment—reducing startup costs and increasing flexibility for students and families—while introducing unequal access tied to NAICS codes, potential revenue loss, and added compliance burdens.
Students and young entrepreneurs can use 529 funds tax-free to purchase depreciable business equipment (excluding buildings) for qualifying trades, lowering start-up costs for those launching small businesses or trade careers.
Families and students get more flexible, tax-advantaged savings options because 529 plans can now cover career-starting tools in specified NAICS fields, increasing the utility of these accounts beyond traditional education expenses.
Taxpayers and entrepreneurs outside the enumerated NAICS codes cannot use 529 funds for similar business equipment, creating unequal treatment based on industry classification.
Allowing 529 withdrawals for business equipment may reduce federal tax revenue and shift fiscal costs to other taxpayers if broadly adopted.
Beneficiaries who use 529 funds for business gear face added recordkeeping and IRS compliance complexity to prove equipment qualifies and is used in listed NAICS activities.
Based on analysis of 2 sections of legislative text.
Allows 529 plan funds to pay for depreciable tangible business property (excluding buildings) used by the beneficiary in specified NAICS-coded trade fields.
Official title: To amend the Internal Revenue Code of 1986 to permit qualified business trade expenses to be treated as qualified higher education expenses for purposes of 529 accounts.
Introduced January 28, 2025 by Marie Gluesenkamp Perez · Last progress January 28, 2025
Expands 529 college savings plans to allow account funds to pay for certain business equipment used by the beneficiary in specified trade fields. The change defines “qualified business trade expenses” as tangible depreciable property (other than buildings) used in enumerated NAICS-coded trades and makes those expenses eligible higher-education expenses for 529 distributions for taxable years beginning after enactment. This lets beneficiaries who pursue careers in listed trades use tax-advantaged 529 savings to buy tools and equipment needed to start or operate their trade business, subject to the statutory definitions and NAICS list.