Summary

Renames Coverdell Education Savings Accounts to Coverdell Lifelong Learning Accounts and expands how funds may be used to cover education, training, career and workforce activities for youth and adults (including some transportation, testing, and computer/internet costs). The bill raises the contribution age limit, allows limited continued contributions for older beneficiaries under an account-balance cap, creates a 25% employer tax credit for nonelective employer contributions to these accounts, lets adult designated beneficiaries deduct contributions, increases the additional tax on certain nonqualified distributions, and changes tax inclusion rules for deductible contributions. Most changes take effect around the start of 2026, with specific rules tied to distributions, contributions, and tax years ending 2025.

Key Points

• Renames Coverdell Education Savings Accounts to Coverdell Lifelong Learning Accounts and reclassifies existing accounts.
• Expands qualified distributions to include post‑16 education, workforce programs, training, and related transportation, testing, and certain computer/internet costs.
• Raises the maximum contribution age from 18 to 70 and allows limited continued contributions for beneficiaries over 30 subject to a $10,000 account-balance cap.
• Creates a 25% employer tax credit for nonelective employer contributions to these accounts, treated as part of the general business credit.
• Permits adult designated beneficiaries (18+) to deduct their own contributions to their accounts, with rollover exclusions.
• Increases the additional tax on some nonqualified distributions from 10% to 20% and changes tax-inclusion rules for deductible contributions.
• Most provisions take effect around January 1, 2026, with specific dates for distributions, contributions, and taxable years ending 2025.
• Includes safeguards on beneficiary rollovers and aggregation/exclusion rules for the employer credit to limit misuse.

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