Sponsors (2)
The bill creates a new tax-advantaged Universal Savings Account with corrective rules and stronger protections against misuse, but it also introduces excise taxes for excess contributions, additional reporting penalties, and greater legal/compliance complexity for account custodians and related parties.
Taxpayers can open Universal Savings Accounts that provide new tax-advantaged treatment for future expenses under clear contribution limits and rollover rules.
Taxpayers who accidentally overcontribute can avoid the excess-contribution excise tax by withdrawing the excess plus earnings before the tax return due date, reducing costly mistakes.
Account holders are better protected from misuse and insider benefit because the bill extends reporting and prohibited-transaction rules that deter and expose improper transactions.
Taxpayers who exceed contribution limits will face an excise tax on excess contributions, increasing costs for people who miscalculate or accidentally overcontribute.
Account holders and custodians face new compliance burdens and a $50-per-failure reporting penalty for failures to meet the extended reporting requirements.
Extending prohibited-transaction rules may expose account managers, fiduciaries, or family members to penalties for certain transfers, increasing legal risk and administrative complexity.
Based on analysis of 2 sections of legislative text.
Adds a new Universal Savings Account category to the tax code and applies excess-contribution, prohibited-transaction, and reporting-penalty rules to those accounts.
Introduced May 5, 2025 by Diana Harshbarger · Last progress May 5, 2025
Creates a new class of tax-advantaged savings accounts called Universal Savings Accounts and updates the Internal Revenue Code so existing excess-contribution taxes, prohibited-transaction rules, and reporting-penalty rules apply to them. The bill inserts new code language and cross-references into the tax code and makes the rules effective for taxable years beginning after December 31, 2024.