Sponsors (7)
The bill expands and modernizes Coverdell ESA uses and creates incentives for employer-supported training—improving access to workforce education—at the cost of higher penalties for some withdrawals, new administrative complexity, contribution-rule changes that may restrict some savers, and reduced federal revenue from the employer credit.
Students, young adults, and low-income learners can use Coverdell ESA funds for a much wider set of 'educational or skill development' costs (career/technical/adult education, testing, transportation, certain technology), improving access to workforce training.
Employers (especially small businesses) receive a new 25% tax credit for nonelective contributions to employees' Coverdell accounts, lowering the cost of offering training benefits and encouraging employer-supported upskilling.
Account holders, beneficiaries, and employers gain new contribution/deduction and beneficiary-deduction flexibilities that may encourage saving and investment in education and workforce skills.
Coverdell account owners face a higher penalty on some nonqualified distributions (additional tax raised from 10% to 20%), increasing costs for those who withdraw funds for noneligible uses.
New eligibility rules and cross-references to multiple workforce statutes add complexity and will require Treasury/IRS guidance, creating short-term compliance burdens for taxpayers, schools, and administrators.
Changes to contribution limits and age-based rules (e.g., a $10,000 cap after age 30 and altered age references) could reduce or restrict contributions for some individuals and create confusion about who can contribute and by how much.
Based on analysis of 2 sections of legislative text.
Renames Coverdell education savings accounts as lifelong learning accounts and expands tax-free distributions to cover defined skill-development and workforce training expenses.
Introduced January 15, 2025 by Glenn Thompson · Last progress January 15, 2025
Renames Coverdell education savings accounts throughout the tax code as Coverdell lifelong learning accounts and expands tax-free (qualified) distributions to cover specified skill-development and workforce training expenses. It treats accounts opened before January 1, 2024 that were labeled Coverdell education savings accounts as if they had been designated Coverdell lifelong learning accounts. The bill adds a new statutory definition of “qualified educational or skill development expenses,” cross-referencing workforce, career-technical, and adult-education programs and explicitly allowing related transportation, testing, and certain computer/software/equipment/internet costs. It also updates internal headings and the table of sections to reflect the new name.