Middle-Income Family Higher Education Savings Act of 1987

Middle-Income Family Higher Education Savings Act of 1987 - Amends the Internal Revenue Code to allow an individual an income tax deduction for contributions to a savings account established to pay the educational expenses (tuition, supplies, meals, and lodging) of the taxpayer's child at an institution of higher education or a vocational school.

Limits the deduction to $1,000 per year per child. Provides that no account may have more than one beneficiary. Permits a deduction with respect to only one account in cases of multiple accounts for the same beneficiary. Disallows the deduction for contributions made to an account after the beneficiary either attains age 25 or graduates from an eligible educational institution.

Permits the exclusion from the gross income of the recipient beneficiary of payments and distributions from an education savings account as long as such amounts: (1) are used for the educational expenses of that individual; or (2) are rolled over into an education savings account established for a sibling of that individual.

Exempts the education savings accounts themselves from taxation unless they cease to be proper education savings accounts because either the contributor taxpayer or the beneficiary engages in prohibited transactions or the beneficiary pledges the account as security.

Establishes penalties in the form of additional tax when account funds or distributions are improperly used.

Requires that the trustee of an education savings account report to the Secretary of the Treasury and to the account's benefactor on the maintenance of the account.

Identifies the criteria and requirements applicable to an education savings account.

Provides that contributions to an education savings account shall not be subject to gift tax.

Establishes: (1) a five percent excise tax on amounts connected with any prohibited transaction with respect to an education savings account; and (2) a penalty for failure to file required reports concerning the education savings account.