Sponsors (2)
Creates new tax‑advantaged Universal Savings Accounts that make saving easier and safer for taxpayers but adds compliance obligations, penalties for errors, and legal exposure for certain transfers.
Taxpayers can open new tax‑advantaged Universal Savings Accounts that make it easier to save for future expenses through defined contribution limits and rollover rules.
Account holders gain stronger protections because extended reporting and prohibited‑transaction rules reduce the risk of misuse and insider benefit.
Taxpayers who accidentally overcontribute can avoid the excess‑contribution excise tax by withdrawing the excess plus earnings before the tax return due date, reducing penalty risk for honest mistakes.
Contributors who exceed the account limits will face an excise tax on excess contributions, increasing costs for taxpayers who miscalculate or mistime contributions.
New reporting requirements and $50‑per‑failure penalties create added compliance costs and administrative burden for account holders and custodians.
Extending prohibited‑transaction rules may expose account managers or family members to penalties for certain transfers, increasing legal risk and administrative complexity for those managing accounts.
Based on analysis of 2 sections of legislative text.
Creates a new tax-preferred "Universal Savings Account" type and extends excess-contribution, prohibited-transaction, and reporting-penalty rules to it.
Official title: To amend the Internal Revenue Code of 1986 to create Universal Savings Accounts.
Introduced May 5, 2025 by Diana Harshbarger · Last progress May 5, 2025
Creates a new federally recognized tax-preferred account type called a "Universal Savings Account" by adding a new part to the Internal Revenue Code and updating related tax penalty and reporting rules. It defines how excess contributions are calculated (with rollover exceptions and a corrective distribution rule) and extends prohibited-transaction and reporting-penalty provisions to these accounts. Changes to the tax code take effect for taxable years beginning after December 31, 2024. The bill is narrow and technical: it establishes the tax framework and enforcement mechanics for the new account type rather than authorizing spending or creating programmatic appropriations.