Achieving Choice in Education Act or the ACE Act
This bill expands the expenses that may be paid for with tax-free distributions from a qualified tuition program (known as a 529 plan) to include certain elementary, secondary, and homeschool education expenses and makes other changes related to 529 plans. The bill also limits the tax exclusion for interest on state or local bonds.
Under current law, 529 plan distributions are excluded from gross income if they are used to pay for qualified higher education expenses, which includes up to $10,000 (per year and per beneficiary) for tuition at an elementary or secondary public, private, or religious school.
The bill expands the expenses that may be paid for with tax-free 529 plan distributions to include homeschooling tuition and the following expenses related to elementary, secondary, and homeschool education:
The bill also increases the amount of tax-free 529 plan distributions that may be used to pay for elementary, secondary, and homeschool education expenses to $20,000.
The bill increases the annual gift tax exclusion by $20,000 for contributions made to a 529 plan. (Under current law, up to $19,000 may be excluded from taxable gifts in 2025.)
Finally, the bill limits the tax exclusion for interest on state or local bonds to bonds issued by states that meet minimum school choice requirements or political subdivisions of such states.
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 750 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 750
To amend the Internal Revenue Code of 1986 to provide incentives for
education.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 28, 2025
Mr. Burlison (for himself, Mr. Harris of Maryland, Mr. Mann, Mr. Weber
of Texas, and Mr. Carter of Texas) introduced the following bill; which
was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide incentives for
education.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Achieving Choice in Education Act''
or the ``ACE Act''.
SEC. 2. 529 ACCOUNT FUNDING FOR HOMESCHOOL AND ADDITIONAL ELEMENTARY
AND SECONDARY EXPENSES.
(a) In General.--Section 529(c)(7) of the Internal Revenue Code of
1986 is amended to read as follows:
``(7) Treatment of elementary and secondary tuition.--Any
reference in this section to the term `qualified higher
education expense' shall include a reference to the following
expenses in connection with enrollment or attendance at, or for
students enrolled at or attending, an elementary or secondary
public, private, or religious school:
``(A) Tuition.
``(B) Curriculum and curricular materials.
``(C) Books or other instructional materials.
``(D) Online educational materials.
``(E) Tuition for tutoring or educational classes
outside of the home, including at a tutoring facility,
but only if the tutor or instructor is not related to
the student and--
``(i) is licensed as a teacher in any
State,
``(ii) has taught at an eligible
educational institution, or
``(iii) is a subject matter expert in the
relevant subject.
``(F) Fees for a nationally standardized norm-
referenced achievement test, an advanced placement
examination, or any examinations related to college or
university admission.
``(G) Fees for dual enrollment in an institution of
higher education.
``(H) Educational therapies for students with
disabilities provided by a licensed or accredited
practitioner or provider, including occupational,
behavioral, physical, and speech-language therapies.
Such term shall include expenses for the purposes described in
subparagraphs (A) through (H) in connection with a homeschool
(whether treated as a homeschool or a private school for
purposes of applicable State law).''.
(b) Effective Date.--The amendment made by this section shall apply
to distributions made after the date of the enactment of this Act.
SEC. 3. INCREASE IN LIMITATION ON DISTRIBUTIONS FROM 529 PLANS FOR
ELEMENTARY AND SECONDARY SCHOOL EXPENSES.
(a) In General.--Section 529(e)(3)(A) of the Internal Revenue Code
of 1986 is amended by striking ``$10,000'' in the flush matter at the
end and inserting ``$20,000''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2024.
SEC. 4. GIFT TAX EXCLUSIONS.
(a) Gift Tax Exclusion for Contributions to 529 Plans.--Section
2503(b) of the Internal Revenue Code of 1986 is amended by adding at
the end the following new paragraph:
``(3) Exclusion for contributions to 529 plans.--The dollar
amount in effect under paragraph (1) with respect to gifts (to
which such paragraph applies) made to any person during any
calendar year shall be increased (not in excess of $20,000) by
the amount of such gifts made during such calendar year to
qualified tuition programs (as defined in section 529) with
respect to which such person is the designated beneficiary.''.
(b) Effective Date.--The amendments made by this section shall
apply to gifts made after December 31, 2024.
SEC. 5. TAX-EXEMPT BONDS RESTRICTED TO STATES THAT IMPLEMENT SCHOOL
CHOICE LAWS.
(a) In General.--Section 103 of the Internal Revenue Code of 1986
is amended by adding at the end the following new subsection:
``(d) Restriction to States That Implement School Choice Laws.--
``(1) In general.--Subsection (a) shall not apply to any
State or local bond unless such bond is issued by a minimum
school choice State or a political subdivision of such a State.
``(2) Partial exclusion with respect to certain states.--
``(A) In general.--In the case of any State or
local bond issued by a minimum school choice State
which does not meet the requirements of subparagraph
(B) (or issued by any political subdivision of such a
State), subsection (a) shall be applied by substituting
`50 percent of the interest' for `interest'.
``(B) Requirements.--A minimum school choice State
meets the requirements of this subparagraph if the
Secretary determines that--
``(i) at least 65 percent of the specified
school age children are eligible for one or
more of such State's school choice programs,
and
``(ii) the average amount spent by such
State on the education of each specified school
age child eligible for one or more such State's
school choice programs is at least 75 percent
of the average amount spent by such State on
the education of each specified school age
child not eligible for one or more of such
programs.
``(3) Minimum school choice state.--For purposes of this
subsection, the term `minimum school choice State' means any
State if the Secretary determines that--
``(A) such State has enacted one or more school
choice programs,
``(B) at least 40 percent of the specified school
age children are eligible for one or more of such
State's school choice programs, and
``(C) the average amount spent by such State on the
education of each specified school age child eligible
for one or more such State's school choice programs is
at least 60 percent of the average amount spent by such
State on the education of each specified school age
child not eligible for one or more of such programs.
``(4) School choice programs.--For purposes of this
subsection, the term `school choice program' means, with
respect to any State, each of the following with respect to
elementary and secondary education in such State:
``(A) Tax credit scholarship programs.
``(B) Voucher programs.
``(C) Education savings account program.
``(D) Refundable tax credit for private education
expenses.
``(5) Specified school age child.--For purposes of this
subsection, the term `specified school age child' means, with
respect to any State, any individual residing in such State who
has not attained age 18.''.
(b) Effective Date.--The amendment made by this section shall apply
to bonds issued after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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