PART VIII—CERTAIN SAVINGS ENTITIES

        

Editorial Notes

Amendments

2014—Pub. L. 113–295, div. B, title I, §102(e)(4), (6), Dec. 19, 2014, 128 Stat. 4062, substituted "CERTAIN" for "HIGHER EDUCATION" in heading and added item 529A.

2004—Pub. L. 108–311, title IV, §408(b)(2), Oct. 4, 2004, 118 Stat. 1192, amended directory language of Pub. L. 107–22, §1(a)(6). See 2001 Amendment note below.

2001—Pub. L. 107–22, §1(a)(6), July 26, 2001, 115 Stat. 196, as amended by Pub. L. 108–311, title IV, §408(b)(2), Oct. 4, 2004, 118 Stat. 1192, substituted "Coverdell education savings accounts" for "Education individual retirement accounts" in item 530.

Pub. L. 107–16, title IV, §402(a)(4)(E), June 7, 2001, 115 Stat. 61, struck out "State" before "tuition" in item 529.

1997—Pub. L. 105–34, title II, §§211(e)(1)(A), 213(e)(3), Aug. 5, 1997, 111 Stat. 812, 817, substituted "HIGHER EDUCATION SAVINGS ENTITIES" for "QUALIFIED STATE TUITION PROGRAMS" in heading and added item 530.

§529. Qualified tuition programs

(a) General rule

A qualified tuition program shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, such program shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations).

(b) Qualified tuition program

For purposes of this section—

(1) In general

The term "qualified tuition program" means a program established and maintained by a State or agency or instrumentality thereof or by 1 or more eligible educational institutions—

(A) under which a person—

(i) may purchase tuition credits or certificates on behalf of a designated beneficiary which entitle the beneficiary to the waiver or payment of qualified higher education expenses of the beneficiary, or

(ii) in the case of a program established and maintained by a State or agency or instrumentality thereof, may make contributions to an account which is established for the purpose of meeting the qualified higher education expenses of the designated beneficiary of the account, and

(B) which meets the other requirements of this subsection.

Except to the extent provided in regulations, a program established and maintained by 1 or more eligible educational institutions shall not be treated as a qualified tuition program unless such program provides that amounts are held in a qualified trust and such program has received a ruling or determination that such program meets the applicable requirements for a qualified tuition program. For purposes of the preceding sentence, the term "qualified trust" means a trust which is created or organized in the United States for the exclusive benefit of designated beneficiaries and with respect to which the requirements of paragraphs (2) and (5) of section 408(a) are met.

(2) Cash contributions

A program shall not be treated as a qualified tuition program unless it provides that purchases or contributions may only be made in cash.

(3) Separate accounting

A program shall not be treated as a qualified tuition program unless it provides separate accounting for each designated beneficiary.

(4) Limited investment direction

A program shall not be treated as a qualified tuition program unless it provides that any contributor to, or designated beneficiary under, such program may, directly or indirectly, direct the investment of any contributions to the program (or any earnings thereon) no more than 2 times in any calendar year.

(5) No pledging of interest as security

A program shall not be treated as a qualified tuition program if it allows any interest in the program or any portion thereof to be used as security for a loan.

(6) Prohibition on excess contributions

A program shall not be treated as a qualified tuition program unless it provides adequate safeguards to prevent contributions on behalf of a designated beneficiary in excess of those necessary to provide for the qualified higher education expenses of the beneficiary.

(c) Tax treatment of designated beneficiaries and contributors

(1) In general

Except as otherwise provided in this subsection, no amount shall be includible in gross income of—

(A) a designated beneficiary under a qualified tuition program, or

(B) a contributor to such program on behalf of a designated beneficiary,

with respect to any distribution or earnings under such program.

(2) Gift tax treatment of contributions

For purposes of chapters 12 and 13—

(A) In general

Any contribution to a qualified tuition program on behalf of any designated beneficiary—

(i) shall be treated as a completed gift to such beneficiary which is not a future interest in property, and

(ii) shall not be treated as a qualified transfer under section 2503(e).

(B) Treatment of excess contributions

If the aggregate amount of contributions described in subparagraph (A) during the calendar year by a donor exceeds the limitation for such year under section 2503(b), such aggregate amount shall, at the election of the donor, be taken into account for purposes of such section ratably over the 5-year period beginning with such calendar year.

(3) Distributions

(A) In general

Any distribution under a qualified tuition program shall be includible in the gross income of the distributee in the manner as provided under section 72 to the extent not excluded from gross income under any other provision of this chapter.

(B) Distributions for qualified higher education expenses

For purposes of this paragraph—

(i) In-kind distributions

No amount shall be includible in gross income under subparagraph (A) by reason of a distribution which consists of providing a benefit to the distributee which, if paid for by the distributee, would constitute payment of a qualified higher education expense.

(ii) Cash distributions

In the case of distributions not described in clause (i), if—

(I) such distributions do not exceed the qualified higher education expenses (reduced by expenses described in clause (i)), no amount shall be includible in gross income, and

(II) in any other case, the amount otherwise includible in gross income shall be reduced by an amount which bears the same ratio to such amount as such expenses bear to such distributions.

(iii) Exception for institutional programs

In the case of any taxable year beginning before January 1, 2004, clauses (i) and (ii) shall not apply with respect to any distribution during such taxable year under a qualified tuition program established and maintained by 1 or more eligible educational institutions.

(iv) Treatment as distributions

Any benefit furnished to a designated beneficiary under a qualified tuition program shall be treated as a distribution to the beneficiary for purposes of this paragraph.

(v) Coordination with American Opportunity and Lifetime Learning credits

The total amount of qualified higher education expenses with respect to an individual for the taxable year shall be reduced—

(I) as provided in section 25A(g)(2), and

(II) by the amount of such expenses which were taken into account in determining the credit allowed to the taxpayer or any other person under section 25A.

(vi) Coordination with Coverdell education savings accounts

If, with respect to an individual for any taxable year—

(I) the aggregate distributions to which clauses (i) and (ii) and section 530(d)(2)(A) apply, exceed

(II) the total amount of qualified higher education expenses otherwise taken into account under clauses (i) and (ii) (after the application of clause (v)) for such year,

 the taxpayer shall allocate such expenses among such distributions for purposes of determining the amount of the exclusion under clauses (i) and (ii) and section 530(d)(2)(A).

(C) Change in beneficiaries or programs

(i) Rollovers

Subparagraph (A) shall not apply to that portion of any distribution which, within 60 days of such distribution, is transferred—

(I) to another qualified tuition program for the benefit of the designated beneficiary,

(II) to the credit of another designated beneficiary under a qualified tuition program who is a member of the family of the designated beneficiary with respect to which the distribution was made, or

(III) before January 1, 2026, to an ABLE account (as defined in section 529A(e)(6)) of the designated beneficiary or a member of the family of the designated beneficiary.

 Subclause (III) shall not apply to so much of a distribution which, when added to all other contributions made to the ABLE account for the taxable year, exceeds the limitation under section 529A(b)(2)(B)(i).

(ii) Change in designated beneficiaries

Any change in the designated beneficiary of an interest in a qualified tuition program shall not be treated as a distribution for purposes of subparagraph (A) if the new beneficiary is a member of the family of the old beneficiary.

(iii) Limitation on certain rollovers

Clause (i)(I) shall not apply to any transfer if such transfer occurs within 12 months from the date of a previous transfer to any qualified tuition program for the benefit of the designated beneficiary.

(D) Special rule for contributions of refunded amounts

In the case of a beneficiary who receives a refund of any qualified higher education expenses from an eligible educational institution, subparagraph (A) shall not apply to that portion of any distribution for the taxable year which is recontributed to a qualified tuition program of which such individual is a beneficiary, but only to the extent such recontribution is made not later than 60 days after the date of such refund and does not exceed the refunded amount.

(E) Special rollover to roth iras from long-term qualified tuition programs

(i) In general

In the case of a distribution from a qualified tuition program of a designated beneficiary which has been maintained for the 15-year period ending on the date of such distribution, subparagraph (A) shall not apply to so much the portion of such distribution which—

(I) does not exceed the aggregate amount contributed to the program (and earnings attributable thereto) before the 5-year period ending on the date of the distribution, and

(II) is paid in a direct trustee-to-trustee transfer to a Roth IRA maintained for the benefit of such designated beneficiary.

(ii) Limitations

(I) Annual limitation

Clause (i) shall only apply to so much of any distribution as does not exceed the amount applicable to the designated beneficiary under section 408A(c)(2) for the taxable year (reduced by the amount of aggregate contributions made during the taxable year to all individual retirement plans maintained for the benefit of the designated beneficiary).

(II) Aggregate limitation

This subparagraph shall not apply to any distribution described in clause (i) to the extent that the aggregate amount of such distributions with respect to the designated beneficiary for such taxable year and all prior taxable years exceeds $35,000.

(4) Estate tax treatment

(A) In general

No amount shall be includible in the gross estate of any individual for purposes of chapter 11 by reason of an interest in a qualified tuition program.

(B) Amounts includible in estate of designated beneficiary in certain cases

Subparagraph (A) shall not apply to amounts distributed on account of the death of a beneficiary.

(C) Amounts includible in estate of donor making excess contributions

In the case of a donor who makes the election described in paragraph (2)(B) and who dies before the close of the 5-year period referred to in such paragraph, notwithstanding subparagraph (A), the gross estate of the donor shall include the portion of such contributions properly allocable to periods after the date of death of the donor.

(5) Other gift tax rules

For purposes of chapters 12 and 13—

(A) Treatment of distributions

Except as provided in subparagraph (B), in no event shall a distribution from a qualified tuition program be treated as a taxable gift.

(B) Treatment of designation of new beneficiary

The taxes imposed by chapters 12 and 13 shall apply to a transfer by reason of a change in the designated beneficiary under the program (or a rollover to the account of a new beneficiary) unless the new beneficiary is—

(i) assigned to the same generation as (or a higher generation than) the old beneficiary (determined in accordance with section 2651), and

(ii) a member of the family of the old beneficiary.

(6) Additional tax

The tax imposed by section 530(d)(4) shall apply to any payment or distribution from a qualified tuition program in the same manner as such tax applies to a payment or distribution from a Coverdell education savings account. This paragraph shall not apply to any payment or distribution in any taxable year beginning before January 1, 2004, which is includible in gross income but used for qualified higher education expenses of the designated beneficiary.

(7) Treatment of elementary and secondary tuition

Any reference in this subsection to the term "qualified higher education expense" shall include a reference to expenses for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school.

(8) Treatment of certain expenses associated with registered apprenticeship programs

Any reference in this subsection to the term "qualified higher education expense" shall include a reference to expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in an apprenticeship program registered and certified with the Secretary of Labor under section 1 of the National Apprenticeship Act (29 U.S.C. 50).

(9) Treatment of qualified education loan repayments

(A) In general

Any reference in this subsection to the term "qualified higher education expense" shall include a reference to amounts paid as principal or interest on any qualified education loan (as defined in section 221(d)) of the designated beneficiary or a sibling of the designated beneficiary.

(B) Limitation

The amount of distributions treated as a qualified higher education expense under this paragraph with respect to the loans of any individual shall not exceed $10,000 (reduced by the amount of distributions so treated for all prior taxable years).

(C) Special rules for siblings of the designated beneficiary

(i) Separate accounting

For purposes of subparagraph (B) and subsection (d), amounts treated as a qualified higher education expense with respect to the loans of a sibling of the designated beneficiary shall be taken into account with respect to such sibling and not with respect to such designated beneficiary.

(ii) Sibling defined

For purposes of this paragraph, the term "sibling" means an individual who bears a relationship to the designated beneficiary which is described in section 152(d)(2)(B).

(d) Reports

(1) In general

Each officer or employee having control of the qualified tuition program or their designee shall make such reports regarding such program to the Secretary and to designated beneficiaries with respect to contributions, distributions, and such other matters as the Secretary may require. The reports required by this paragraph shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required by the Secretary.

(2) Rollover distributions

In the case of any distribution described in subsection (c)(3)(E), the officer or employee having control of the qualified tuition program (or their designee) shall provide a report to the trustee of the Roth IRA to which the distribution is made. Such report shall be filed at such time and in such manner as the Secretary may require and shall include information with respect to the contributions, distributions, and earnings of the qualified tuition program as of the date of the distribution described in subsection (c)(3)(A), together with such other matters as the Secretary may require.

(e) Other definitions and special rules

For purposes of this section—

(1) Designated beneficiary

The term "designated beneficiary" means—

(A) the individual designated at the commencement of participation in the qualified tuition program as the beneficiary of amounts paid (or to be paid) to the program,

(B) in the case of a change in beneficiaries described in subsection (c)(3)(C), the individual who is the new beneficiary, and

(C) in the case of an interest in a qualified tuition program purchased by a State or local government (or agency or instrumentality thereof) or an organization described in section 501(c)(3) and exempt from taxation under section 501(a) as part of a scholarship program operated by such government or organization, the individual receiving such interest as a scholarship.

(2) Member of family

The term "member of the family" means, with respect to any designated beneficiary—

(A) the spouse of such beneficiary;

(B) an individual who bears a relationship to such beneficiary which is described in subparagraphs (A) through (G) of section 152(d)(2);

(C) the spouse of any individual described in subparagraph (B); and

(D) any first cousin of such beneficiary.

(3) Qualified higher education expenses

(A) In general

The term "qualified higher education expenses" means—

(i) tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution,

(ii) expenses for special needs services in the case of a special needs beneficiary which are incurred in connection with such enrollment or attendance, and

(iii) expenses for the purchase of computer or peripheral equipment (as defined in section 168(i)(2)(B)), computer software (as defined in section 197(e)(3)(B)), or Internet access and related services, if such equipment, software, or services are to be used primarily by the beneficiary during any of the years the beneficiary is enrolled at an eligible educational institution.

Clause (iii) shall not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature. The amount of cash distributions from all qualified tuition programs described in subsection (b)(1)(A)(ii) with respect to a beneficiary during any taxable year shall, in the aggregate, include not more than $10,000 in expenses described in subsection (c)(7) incurred during the taxable year.

(B) Room and board included for students who are at least half-time

(i) In general

In the case of an individual who is an eligible student (as defined in section 25A(b)(3)) for any academic period, such term shall also include reasonable costs for such period (as determined under the qualified tuition program) incurred by the designated beneficiary for room and board while attending such institution. For purposes of subsection (b)(6), a designated beneficiary shall be treated as meeting the requirements of this clause.

(ii) Limitation

The amount treated as qualified higher education expenses by reason of clause (i) shall not exceed—

(I) the allowance (applicable to the student) for room and board included in the cost of attendance (as defined in section 472 of the Higher Education Act of 1965 (20 U.S.C. 1087ll), as in effect on the date of the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001) as determined by the eligible educational institution for such period, or

(II) if greater, the actual invoice amount the student residing in housing owned or operated by the eligible educational institution is charged by such institution for room and board costs for such period.

(4) Application of section 514

An interest in a qualified tuition program shall not be treated as debt for purposes of section 514.

(5) Eligible educational institution

The term "eligible educational institution" means an institution—

(A) which is described in section 481 of the Higher Education Act of 1965 (20 U.S.C. 1088), as in effect on the date of the enactment of this paragraph, and

(B) which is eligible to participate in a program under title IV of such Act.

(f) Regulations

Notwithstanding any other provision of this section, the Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section and to prevent abuse of such purposes, including regulations under chapters 11, 12, and 13 of this title.

(Added Pub. L. 104–188, title I, §1806(a), Aug. 20, 1996, 110 Stat. 1895; amended Pub. L. 105–34, title II, §211(a), (b), (d), (e)(2)(A), title XVI, §1601(h)(1)(A), (B), Aug. 5, 1997, 111 Stat. 810, 812, 1092; Pub. L. 105–206, title VI, §6004(c)(2), (3), July 22, 1998, 112 Stat. 793; Pub. L. 106–554, §1(a)(7) [title III, §319(5)], Dec. 21, 2000, 114 Stat. 2763, 2763A-646; Pub. L. 107–16, title IV, §402(a)(1)–(3), (4)(A), (C), (D), (b)(1), (c)–(g), June 7, 2001, 115 Stat. 60–63; Pub. L. 107–22, §1(b)(3)(C), July 26, 2001, 115 Stat. 197; Pub. L. 107–147, title IV, §417(11), Mar. 9, 2002, 116 Stat. 56; Pub. L. 108–311, title II, §207(21), title IV, §406(a), Oct. 4, 2004, 118 Stat. 1178, 1189; Pub. L. 109–135, title IV, §412(ee)(3), Dec. 21, 2005, 119 Stat. 2639; Pub. L. 109–280, title XIII, §1304(b), Aug. 17, 2006, 120 Stat. 1110; Pub. L. 111–5, div. B, title I, §1005(a), Feb. 17, 2009, 123 Stat. 316; Pub. L. 113–295, div. B, title I, §105(a), Dec. 19, 2014, 128 Stat. 4064; Pub. L. 114–113, div. Q, title III, §302(a)(1), (b)(1), (c)(1), Dec. 18, 2015, 129 Stat. 3086; Pub. L. 115–97, title I, §§11025(a), 11032(a), Dec. 22, 2017, 131 Stat. 2076, 2081; Pub. L. 115–141, div. U, title I, §101(l)(15), title IV, §401(a)(127), (128), Mar. 23, 2018, 132 Stat. 1165, 1190; Pub. L. 116–94, div. O, title III, §302(a), (b)(1), Dec. 20, 2019, 133 Stat. 3175; Pub. L. 117–328, div. T, title I, §126(a), (c), Dec. 29, 2022, 136 Stat. 5316, 5317.)

Editorial Notes

References in Text

The date of the enactment of the Economic Growth and Tax Relief Reconciliation Act of 2001, referred to in subsec. (e)(3)(B)(ii)(I), is the date of enactment of Pub. L. 107–16, which was approved June 7, 2001.

The date of the enactment of this paragraph, referred to in subsec. (e)(5)(A), probably means the date of enactment of Pub. L. 105–34, which enacted subsec. (e)(5) and which was approved Aug. 5, 1997.

The Higher Education Act of 1965, referred to in subsec. (e)(5), is Pub. L. 89–329, Nov. 8, 1965, 79 Stat. 1219. Title IV of the Act is classified generally to subchapter IV (§1070 et seq.) of chapter 28 of Title 20, Education. For complete classification of this Act to the Code, see Short Title note set out under section 1001 of Title 20 and Tables.

Amendments

2022—Subsec. (c)(3)(E). Pub. L. 117–328, §126(a), added subpar. (E).

Subsec. (d). Pub. L. 117–328, §126(c), designated existing provisions as par. (1), inserted heading, substituted "by this paragraph" for "by this subsection", and added par. (2).

2019—Subsec. (c)(8). Pub. L. 116–94, §302(a), added par. (8).

Subsec. (c)(9). Pub. L. 116–94, §302(b)(1), added par. (9).

2018—Subsec. (c)(3)(B)(v). Pub. L. 115–141, §101(l)(15), substituted "American Opportunity" for "Hope" in heading.

Subsec. (c)(6). Pub. L. 115–141, §401(a)(127), substituted "a Coverdell" for "an Coverdell".

Subsec. (e)(3)(A). Pub. L. 115–141, §401(a)(128), substituted comma for semicolon at end of cl. (i) and inserted ", and" at end of cl. (ii).

2017—Subsec. (c)(3)(C)(i). Pub. L. 115–97, §11025(a), added subcl. (III) and inserted concluding provisions.

Subsec. (c)(7). Pub. L. 115–97, §11032(a)(1), added par. (7).

Subsec. (e)(3)(A). Pub. L. 115–97, §11032(a)(2), inserted at end of concluding provisions "The amount of cash distributions from all qualified tuition programs described in subsection (b)(1)(A)(ii) with respect to a beneficiary during any taxable year shall, in the aggregate, include not more than $10,000 in expenses described in subsection (c)(7) incurred during the taxable year."

2015—Subsec. (c)(3)(D). Pub. L. 114–113, §302(c)(1), added subpar. (D).

Pub. L. 114–113, §302(b)(1), struck out subpar. (D). Text read as follows: "For purposes of applying section 72—

"(i) to the extent provided by the Secretary, all qualified tuition programs of which an individual is a designated beneficiary shall be treated as one program,

"(ii) except to the extent provided by the Secretary, all distributions during a taxable year shall be treated as one distribution, and

"(iii) except to the extent provided by the Secretary, the value of the contract, income on the contract, and investment in the contract shall be computed as of the close of the calendar year in which the taxable year begins."

Subsec. (e)(3)(A)(iii). Pub. L. 114–113, §302(a)(1), amended cl. (iii) generally. Prior to amendment, cl. (iii) read as follows: "expenses paid or incurred in 2009 or 2010 for the purchase of any computer technology or equipment (as defined in section 170(e)(6)(F)(i)) or Internet access and related services, if such technology, equipment, or services are to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is enrolled at an eligible educational institution."

2014—Subsec. (b)(4). Pub. L. 113–295 substituted "Limited" for "No" in heading and "may, directly or indirectly, direct the investment of any contributions to the program (or any earnings thereon) no more than 2 times in any calendar year." for "may not directly or indirectly direct the investment of any contributions to the program (or any earnings thereon)." in text.

2009—Subsec. (e)(3)(A). Pub. L. 111–5 added cl. (iii) and concluding provisions.

2006—Subsec. (f). Pub. L. 109–280, which directed the addition of subsec. (f) to section 529, without specifying the act to be amended, was executed by making the addition to this section, which is section 529 of the Internal Revenue Code of 1986, to reflect the probable intent of Congress.

2005—Subsec. (c)(6). Pub. L. 109–135 substituted "Coverdell education savings account" for "education individual retirement account".

2004—Subsec. (c)(5)(B). Pub. L. 108–311, §406(a), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: "The taxes imposed by chapters 12 and 13 shall apply to a transfer by reason of a change in the designated beneficiary under the program (or a rollover to the account of a new beneficiary) only if the new beneficiary is a generation below the generation of the old beneficiary (determined in accordance with section 2651)."

Subsec. (e)(2)(B). Pub. L. 108–311, §207(21), substituted "subparagraphs (A) through (G) of section 152(d)(2)" for "paragraphs (1) through (8) of section 152(a)".

2002—Subsec. (e)(3)(B)(i). Pub. L. 107–147 substituted "subsection (b)(6)" for "subsection (b)(7)".

2001—Pub. L. 107–16, §402(a)(4)(D), struck out "State" before "tuition" in section catchline.

Subsec. (a). Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

Subsec. (b). Pub. L. 107–16, §402(a)(4)(C), substituted "Qualified tuition" for "Qualified State tuition" in heading.

Subsec. (b)(1). Pub. L. 107–16, §402(a)(1), (4)(A), in introductory provisions, substituted "qualified tuition" for "qualified State tuition" and inserted "or by 1 or more eligible educational institutions" after "thereof", and added concluding provisions.

Subsec. (b)(1)(A)(ii). Pub. L. 107–16, §402(a)(2), inserted "in the case of a program established and maintained by a State or agency or instrumentality thereof," before "may make".

Subsec. (b)(2). Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

Subsec. (b)(3) to (7). Pub. L. 107–16, §402(a)(3)(A), (4)(A), redesignated pars. (4) to (7) as (3) to (6), respectively, substituted "qualified tuition" for "qualified State tuition" wherever appearing, and struck out heading and text of former par. (3). Text read as follows: "A program shall not be treated as a qualified State tuition program unless it imposes a more than de minimis penalty on any refund of earnings from the account which are not—

"(A) used for qualified higher education expenses of the designated beneficiary,

"(B) made on account of the death or disability of the designated beneficiary, or

"(C) made on account of a scholarship (or allowance or payment described in section 135(d)(1)(B) or (C)) received by the designated beneficiary to the extent the amount of the refund does not exceed the amount of the scholarship, allowance, or payment."

Subsec. (c)(1)(A), (3)(A). Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

Subsec. (c)(3)(B). Pub. L. 107–16, §402(b)(1), amended heading and text of subpar. (B) generally. Prior to amendment, text read as follows: "Any benefit furnished to a designated beneficiary under a qualified tuition program shall be treated as a distribution to the beneficiary."

Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

Subsec. (c)(3)(B)(vi). Pub. L. 107–22 substituted "Coverdell education savings" for "education individual retirement" in heading.

Subsec. (c)(3)(C). Pub. L. 107–16, §402(c)(3), inserted "or programs" after "beneficiaries" in heading.

Subsec. (c)(3)(C)(i). Pub. L. 107–16, §402(c)(1), substituted "transferred—" for "transferred", added subcl. (I), and designated existing provisions "to the credit" as subcl. (II).

Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

Subsec. (c)(3)(C)(ii). Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

Subsec. (c)(3)(C)(iii). Pub. L. 107–16, §402(c)(2), added cl. (iii).

Subsec. (c)(3)(D)(i). Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

Subsec. (c)(3)(D)(ii). Pub. L. 107–16, §402(g)(1), inserted "except to the extent provided by the Secretary," before "all distributions".

Subsec. (c)(3)(D)(iii). Pub. L. 107–16, §402(g)(2), inserted "except to the extent provided by the Secretary," before "the value".

Subsec. (c)(6). Pub. L. 107–16, §402(a)(3)(B), added par. (6).

Subsecs. (d), (e)(1)(A), (C). Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

Subsec. (e)(2)(D). Pub. L. 107–16, §402(d), added subpar. (D).

Subsec. (e)(3)(A). Pub. L. 107–16, §402(f), reenacted heading without change and amended text of subpar. (A) generally. Prior to amendment, text read as follows: "The term 'qualified higher education expenses' means tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution."

Subsec. (e)(3)(B)(i). Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

Subsec. (e)(3)(B)(ii). Pub. L. 107–16, §402(e), reenacted heading without change and amended text of cl. (ii) generally. Prior to amendment, text read as follows: "The amount treated as qualified higher education expenses by reason of the preceding sentence shall not exceed the minimum amount (applicable to the student) included for room and board for such period in the cost of attendance (as defined in section 472 of the Higher Education Act of 1965, 20 U.S.C. 1087ll, as in effect on the date of the enactment of this paragraph) for the eligible educational institution for such period."

Subsec. (e)(4). Pub. L. 107–16, §402(a)(4)(A), substituted "qualified tuition" for "qualified State tuition".

2000—Subsec. (e)(3)(B). Pub. L. 106–554 struck out "under guaranteed plans" after "students" in heading.

1998—Subsec. (c)(3)(A). Pub. L. 105–206, §6004(c)(2), substituted "section 72" for "section 72(b)".

Subsec. (e)(2). Pub. L. 105–206, §6004(c)(3), reenacted heading without change and amended text of par. (2) generally. Prior to amendment, text read as follows: "The term 'member of the family' means—

"(A) an individual who bears a relationship to another individual which is a relationship described in paragraphs (1) through (8) of section 152(a), and

"(B) the spouse of any individual described in subparagraph (A)."

1997—Subsec. (b)(5). Pub. L. 105–34, §211(b)(4), inserted "directly or indirectly" after "may not".

Subsec. (c)(2). Pub. L. 105–34, §211(b)(3)(A)(i), amended heading and text of par. (2) generally. Prior to amendment, text read as follows: "In no event shall a contribution to a qualified State tuition program on behalf of a designated beneficiary be treated as a taxable gift for purposes of chapter 12."

Subsec. (c)(3)(A). Pub. L. 105–34, §211(d), substituted "section 72(b)" for "section 72".

Subsec. (c)(4). Pub. L. 105–34, §211(b)(3)(B), amended heading and text of par. (4) generally. Prior to amendment, text read as follows: "The value of any interest in any qualified State tuition program which is attributable to contributions made by an individual to such program on behalf of any designated beneficiary shall be includible in the gross estate of the contributor for purposes of chapter 11."

Subsec. (c)(5). Pub. L. 105–34, §211(b)(3)(A)(ii), amended heading and text of par. (5) generally. Prior to amendment, text read as follows: "For purposes of section 2503(e), the waiver (or payment to an educational institution) of qualified higher education expenses of a designated beneficiary under a qualified State tuition program shall be treated as a qualified transfer."

Subsec. (d). Pub. L. 105–34, §211(e)(2)(A), amended subsec. (d) generally. Prior to amendment, subsec. (d) read as follows:

"(d) Reporting Requirements.—

"(1) In general.—If there is a distribution to any individual with respect to an interest in a qualified State tuition program during any calendar year, each officer or employee having control of the qualified State tuition program or their designee shall make such reports as the Secretary may require regarding such distribution to the Secretary and to the designated beneficiary or the individual to whom the distribution was made. Any such report shall include such information as the Secretary may prescribe.

"(2) Timing of reports.—Any report required by this subsection—

"(A) shall be filed at such time and in such matter as the Secretary prescribes, and

"(B) shall be furnished to individuals not later than January 31 of the calendar year following the calendar year to which such report relates."

Subsec. (e)(1)(B). Pub. L. 105–34, §1601(h)(1)(A), substituted "subsection (c)(3)(C)" for "subsection (c)(2)(C)".

Subsec. (e)(1)(C). Pub. L. 105–34, §1601(h)(1)(B), inserted "(or agency or instrumentality thereof)" after "local government".

Subsec. (e)(2). Pub. L. 105–34, §211(b)(1), amended heading and text of par. (2) generally. Prior to amendment, text read as follows: "The term 'member of the family' has the same meaning given such term as section 2032A(e)(2)."

Subsec. (e)(3). Pub. L. 105–34, §211(a), amended heading and text of par. (3) generally. Prior to amendment, text read as follows: "The term 'qualified higher education expenses' means tuition, fees, books, supplies, and equipment required for the enrollment or attendance of a designated beneficiary at an eligible educational institution (as defined in section 135(c)(3))."

Subsec. (e)(5). Pub. L. 105–34, §211(b)(2), added par. (5).

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Amendment by Pub. L. 117–328 applicable with respect to distributions after Dec. 31, 2023, see section 126(d) of Pub. L. 117–328, set out as a note under section 408A of this title.

Effective Date of 2019 Amendment

Amendment by Pub. L. 116–94 applicable to distributions made after Dec. 31, 2018, see section 302(c) of Pub. L. 116–94, set out as a note under section 221 of this title.

Effective Date of 2018 Amendment

Amendment by section 101(l)(15) of Pub. L. 115–141 effective as if included in the provision of the Protecting Americans from Tax Hikes Act of 2015, div. Q of Pub. L. 114–113, to which such amendment relates, see section 101(s) of Pub. L. 115–141, set out as a note under section 24 of this title.

Effective Date of 2017 Amendment

Pub. L. 115–97, title I, §11025(b), Dec. 22, 2017, 131 Stat. 2076, provided that: "The amendments made by this section [amending this section] shall apply to distributions after the date of the enactment of this Act [Dec. 22, 2017]."

Pub. L. 115–97, title I, §11032(b), Dec. 22, 2017, 131 Stat. 2082, provided that: "The amendments made by this section [amending this section] shall apply to distributions made after December 31, 2017."

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title III, §302(a)(2), Dec. 18, 2015, 129 Stat. 3086, provided that: "The amendment made by this subsection [amending this section] shall apply to taxable years beginning after December 31, 2014."

Pub. L. 114–113, div. Q, title III, §302(b)(2), Dec. 18, 2015, 129 Stat. 3086, provided that: "The amendment made by this subsection [amending this section] shall apply to distributions after December 31, 2014."

Pub. L. 114–113, div. Q, title III, §302(c)(2), Dec. 18, 2015, 129 Stat. 3087, provided that:

"(A) In general.—The amendment made by this subsection [amending this section] shall apply with respect to refunds of qualified higher education expenses after December 31, 2014.

"(B) Transition rule.—In the case of a refund of qualified higher education expenses received after December 31, 2014, and before the date of the enactment of this Act [Dec. 18, 2015], section 529(c)(3)(D) of the Internal Revenue Code of 1986 (as added by this subsection) shall be applied by substituting 'not later than 60 days after the date of the enactment of this subparagraph [Dec. 18, 2015]' for 'not later than 60 days after the date of such refund'."

Effective Date of 2014 Amendment

Pub. L. 113–295, div. B, title I, §105(b), Dec. 19, 2014, 128 Stat. 4064, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2014."

Effective Date of 2009 Amendment

Pub. L. 111–5, div. B, title I, §1005(b), Feb. 17, 2009, 123 Stat. 316, provided that: "The amendments made by this section [amending this section] shall apply to expenses paid or incurred after December 31, 2008."

Effective Date of 2004 Amendment

Amendment by section 207(21) of Pub. L. 108–311 applicable to taxable years beginning after Dec. 31, 2004, see section 208 of Pub. L. 108–311, set out as a note under section 2 of this title.

Amendment by section 406(a) of Pub. L. 108–311 effective as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 406(h) of Pub. L. 108–311, set out as a note under section 55 of this title.

Effective Date of 2001 Amendments

Amendment by Pub. L. 107–22 effective July 26, 2001, see section 1(c) of Pub. L. 107–22, set out as a note under section 26 of this title.

Amendment by Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 402(h) of Pub. L. 107–16, set out as a note under section 72 of this title.

Effective Date of 1998 Amendment

Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date of 1997 Amendment

Pub. L. 105–34, title II, §211(f), Aug. 5, 1997, 111 Stat. 812, provided that:

"(1) In general.—Except as otherwise provided in this subsection, the amendments made by this section [amending this section and sections 135 and 6693 of this title] shall take effect on January 1, 1998.

"(2) Expenses to include room and board.—The amendment made by subsection (a) shall take effect as if included in the amendments made by section 1806 of the Small Business Job Protection Act of 1996 [Pub. L. 104–188].

"(3) Eligible educational institution.—The amendment made by subsection (b)(2) [amending this section] shall apply to distributions after December 31, 1997, with respect to expenses paid after such date (in taxable years ending after such date), for education furnished in academic periods beginning after such date.

"(4) Coordination with education savings bonds.—The amendment made by subsection (c) [amending section 135 of this title] shall apply to taxable years beginning after December 31, 1997.

"(5) Estate and gift tax changes.—

"(A) Gift tax changes.—Paragraphs (2) and (5) of section 529(c) of the Internal Revenue Code of 1986, as amended by this section, shall apply to transfers (including designations of new beneficiaries) made after the date of the enactment of this Act [Aug. 5, 1997].

"(B) Estate tax changes.—Paragraph (4) of such section 529(c) shall apply to estates of decedents dying after June 8, 1997.

"(6) Transition rule for pre-august 20, 1996 contracts.—In the case of any contract issued prior to August 20, 1996, section 529(c)(3)(C) of the Internal Revenue Code of 1986 shall be applied for taxable years ending after August 20, 1996, without regard to the requirement that a distribution be transferred to a member of the family or the requirement that a change in beneficiaries may be made only to a member of the family."

Amendment by section 1601(h)(1)(A), (B) of Pub. L. 105–34 effective as if included in the provisions of the Small Business Job Protection Act of 1996, Pub. L. 104–188, to which it relates, see section 1601(j) of Pub. L. 105–34, set out as a note under section 23 of this title.

Effective Date

Pub. L. 104–188, title I, §1806(c), Aug. 20, 1996, 110 Stat. 1898, as amended by Pub. L. 105–34, title XVI, §1601(h)(1)(C), Aug. 5, 1997, 111 Stat. 1092, provided that:

"(1) In general.—The amendments made by this section [enacting this section and amending section 135 of this title] shall apply to taxable years ending after the date of the enactment of this Act [Aug. 20, 1996].

"(2) Transition rule.—If—

"(A) a State or agency or instrumentality thereof maintains, on the date of the enactment of this Act, a program under which persons may purchase tuition credits or certificates on behalf of, or make contributions for education expenses of, a designated beneficiary, and

"(B) such program meets the requirements of a qualified State tuition program before the later of—

"(i) the date which is 1 year after such date of enactment, or

"(ii) the first day of the first calendar quarter after the close of the first regular session of the State legislature that begins after such date of enactment,

then such program (as in effect on August 20, 1996) shall be treated as a qualified State tuition program with respect to contributions (and earnings allocable thereto) pursuant to contracts entered into under such program before the first date on which such program meets such requirements (determined without regard to this paragraph) and the provisions of such program (as so in effect) shall apply in lieu of section 529(b) of the Internal Revenue Code of 1986 with respect to such contributions and earnings.

For purposes of subparagraph (B)(ii), if a State has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature."

§529A. Qualified ABLE programs

(a) General rule

A qualified ABLE program shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, such program shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations).

(b) Qualified ABLE program

For purposes of this section—

(1) In general

The term "qualified ABLE program" means a program established and maintained by a State, or agency or instrumentality thereof—

(A) under which a person may make contributions for a taxable year, for the benefit of an individual who is an eligible individual for such taxable year, to an ABLE account which is established for the purpose of meeting the qualified disability expenses of the designated beneficiary of the account,

(B) which limits a designated beneficiary to 1 ABLE account for purposes of this section, and

(C) which meets the other requirements of this section.

(2) Cash contributions

A program shall not be treated as a qualified ABLE program unless it provides that no contribution will be accepted—

(A) unless it is in cash, or

(B) except in the case of contributions under subsection (c)(1)(C), if such contribution to an ABLE account would result in aggregate contributions from all contributors to the ABLE account for the taxable year exceeding the sum of—

(i) the amount in effect under section 2503(b) for the calendar year in which the taxable year begins, plus

(ii) in the case of any contribution by a designated beneficiary described in paragraph (7) before January 1, 2026, the lesser of—

(I) compensation (as defined by section 219(f)(1)) includible in the designated beneficiary's gross income for the taxable year, or

(II) an amount equal to the poverty line for a one-person household, as determined for the calendar year preceding the calendar year in which the taxable year begins.

For purposes of this paragraph, rules similar to the rules of section 408(d)(4) (determined without regard to subparagraph (B) thereof) shall apply. A designated beneficiary (or a person acting on behalf of such beneficiary) shall maintain adequate records for purposes of ensuring, and shall be responsible for ensuring, that the requirements of subparagraph (B)(ii) are met.

(3) Separate accounting

A program shall not be treated as a qualified ABLE program unless it provides separate accounting for each designated beneficiary.

(4) Limited investment direction

A program shall not be treated as a qualified ABLE program unless it provides that any designated beneficiary under such program may, directly or indirectly, direct the investment of any contributions to the program (or any earnings thereon) no more than 2 times in any calendar year.

(5) No pledging of interest as security

A program shall not be treated as a qualified ABLE program if it allows any interest in the program or any portion thereof to be used as security for a loan.

(6) Prohibition on excess contributions

A program shall not be treated as a qualified ABLE program unless it provides adequate safeguards to prevent aggregate contributions on behalf of a designated beneficiary in excess of the limit established by the State under section 529(b)(6). For purposes of the preceding sentence, aggregate contributions include contributions under any prior qualified ABLE program of any State or agency or instrumentality thereof.

(7) Special rules related to contribution limit

For purposes of paragraph (2)(B)(ii)—

(A) Designated beneficiary

A designated beneficiary described in this paragraph is an employee (including an employee within the meaning of section 401(c)) with respect to whom—

(i) no contribution is made for the taxable year to a defined contribution plan (within the meaning of section 414(i)) with respect to which the requirements of section 401(a) or 403(a) are met,

(ii) no contribution is made for the taxable year to an annuity contract described in section 403(b), and

(iii) no contribution is made for the taxable year to an eligible deferred compensation plan described in section 457(b).

(B) Poverty line

The term "poverty line" has the meaning given such term by section 673 of the Community Services Block Grant Act (42 U.S.C. 9902).

(c) Tax treatment

(1) Distributions

(A) In general

Any distribution under a qualified ABLE program shall be includible in the gross income of the distributee in the manner as provided under section 72 to the extent not excluded from gross income under any other provision of this chapter.

(B) Distributions for qualified disability expenses

For purposes of this paragraph, if distributions from a qualified ABLE program—

(i) do not exceed the qualified disability expenses of the designated beneficiary, no amount shall be includible in gross income, and

(ii) in any other case, the amount otherwise includible in gross income shall be reduced by an amount which bears the same ratio to such amount as such expenses bear to such distributions.

(C) Change in designated beneficiaries or programs

(i) Rollovers from ABLE accounts

Subparagraph (A) shall not apply to any amount paid or distributed from an ABLE account to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into another ABLE account for the benefit of the same designated beneficiary or an eligible individual who is a member of the family of the designated beneficiary.

(ii) Change in designated beneficiaries

Any change in the designated beneficiary of an interest in a qualified ABLE program during a taxable year shall not be treated as a distribution for purposes of subparagraph (A) if the new beneficiary is an eligible individual for such taxable year and a member of the family of the former beneficiary.

(iii) Limitation on certain rollovers

Clause (i) shall not apply to any transfer if such transfer occurs within 12 months from the date of a previous transfer to any qualified ABLE program for the benefit of the designated beneficiary.

(2) Gift tax rules

For purposes of chapters 12 and 13—

(A) Contributions

Any contribution to a qualified ABLE program on behalf of any designated beneficiary—

(i) shall be treated as a completed gift to such designated beneficiary which is not a future interest in property, and

(ii) shall not be treated as a qualified transfer under section 2503(e).

(B) Treatment of distributions

In no event shall a distribution from an ABLE account to such account's designated beneficiary be treated as a taxable gift.

(C) Treatment of transfer to new designated beneficiary

The taxes imposed by chapters 12 and 13 shall not apply to a transfer by reason of a change in the designated beneficiary under subsection (c)(1)(C).

(3) Additional tax for distributions not used for disability expenses

(A) In general

The tax imposed by this chapter for any taxable year on any taxpayer who receives a distribution from a qualified ABLE program which is includible in gross income shall be increased by 10 percent of the amount which is so includible.

(B) Exception

Subparagraph (A) shall not apply if the payment or distribution is made to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary.

(C) Contributions returned before certain date

Subparagraph (A) shall not apply to the distribution of any contribution made during a taxable year on behalf of the designated beneficiary if—

(i) such distribution is received on or before the day prescribed by law (including extensions of time) for filing such designated beneficiary's return for such taxable year, and

(ii) such distribution is accompanied by the amount of net income attributable to such excess contribution.

Any net income described in clause (ii) shall be included in gross income for the taxable year in which such excess contribution was made.

(4) Loss of ABLE account treatment

If an ABLE account is established for a designated beneficiary, no account subsequently established for such beneficiary shall be treated as an ABLE account. The preceding sentence shall not apply in the case of an account established for purposes of a rollover described in paragraph (1)(C)(i) of this section if the transferor account is closed as of the end of the 60th day referred to in paragraph (1)(C)(i).

(d) Reports

(1) In general

Each officer or employee having control of the qualified ABLE program or their designee shall make such reports regarding such program to the Secretary and to designated beneficiaries with respect to contributions, distributions, the return of excess contributions, and such other matters as the Secretary may require.

(2) Certain aggregated information

For research purposes, the Secretary shall make available to the public reports containing aggregate information, by diagnosis and other relevant characteristics, on contributions and distributions from the qualified ABLE program. In carrying out the preceding sentence an item may not be made available to the public if such item can be associated with, or otherwise identify, directly or indirectly, a particular individual.

(3) Notice of establishment of ABLE account

A qualified ABLE program shall submit a notice to the Secretary upon the establishment of an ABLE account. Such notice shall contain the name of the designated beneficiary and such other information as the Secretary may require.

(4) Electronic distribution statements

For purposes of section 103 of the Stephen Beck, Jr., ABLE Act of 2014, States shall submit electronically on a monthly basis to the Commissioner of Social Security, in the manner specified by the Commissioner, statements on relevant distributions and account balances from all ABLE accounts.

(5) Requirements

The reports and notices required by paragraphs (1), (2), and (3) shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required by the Secretary.

(e) Other definitions and special rules

For purposes of this section—

(1) Eligible individual

An individual is an eligible individual for a taxable year if during such taxable year—

(A) the individual is entitled to benefits based on blindness or disability under title II or XVI of the Social Security Act, and such blindness or disability occurred before the date on which the individual attained age 26, or

(B) a disability certification with respect to such individual is filed with the Secretary for such taxable year.

(2) Disability certification

(A) In general

The term "disability certification" means, with respect to an individual, a certification to the satisfaction of the Secretary by the individual or the parent or guardian of the individual that—

(i) certifies that—

(I) the individual has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, or is blind (within the meaning of section 1614(a)(2) of the Social Security Act), and

(II) such blindness or disability occurred before the date on which the individual attained age 26, and

(ii) includes a copy of the individual's diagnosis relating to the individual's relevant impairment or impairments, signed by a physician meeting the criteria of section 1861(r)(1) of the Social Security Act.

(B) Restriction on use of certification

No inference may be drawn from a disability certification for purposes of establishing eligibility for benefits under title II, XVI, or XIX of the Social Security Act.

(3) Designated beneficiary

The term "designated beneficiary" in connection with an ABLE account established under a qualified ABLE program means the eligible individual who established an ABLE account and is the owner of such account.

(4) Member of family

The term "member of the family" means, with respect to any designated beneficiary, an individual who bears a relationship to such beneficiary which is described in section 152(d)(2)(B). For purposes of the preceding sentence, a rule similar to the rule of section 152(f)(1)(B) shall apply.

(5) Qualified disability expenses

The term "qualified disability expenses" means any expenses related to the eligible individual's blindness or disability which are made for the benefit of an eligible individual who is the designated beneficiary, including the following expenses: education, housing, transportation, employment training and support, assistive technology and personal support services, health, prevention and wellness, financial management and administrative services, legal fees, expenses for oversight and monitoring, funeral and burial expenses, and other expenses, which are approved by the Secretary under regulations and consistent with the purposes of this section.

(6) ABLE account

The term "ABLE account" means an account established by an eligible individual, owned by such eligible individual, and maintained under a qualified ABLE program.

(f) Transfer to State

Subject to any outstanding payments due for qualified disability expenses, upon the death of the designated beneficiary, all amounts remaining in the qualified ABLE account not in excess of the amount equal to the total medical assistance paid for the designated beneficiary after the establishment of the account, net of any premiums paid from the account or paid by or on behalf of the beneficiary to a Medicaid Buy-In program under any State Medicaid plan established under title XIX of the Social Security Act, shall be distributed to such State upon filing of a claim for payment by such State. For purposes of this paragraph, the State shall be a creditor of an ABLE account and not a beneficiary. Subsection (c)(3) shall not apply to a distribution under the preceding sentence.

(g) Regulations

The Secretary shall prescribe such regulations or other guidance as the Secretary determines necessary or appropriate to carry out the purposes of this section, including regulations—

(1) to enforce the 1 ABLE account per eligible individual limit,

(2) providing for the information required to be presented to open an ABLE account,

(3) to generally define qualified disability expenses,

(4) developed in consultation with the Commissioner of Social Security, relating to disability certifications and determinations of disability, including those conditions deemed to meet the requirements of subsection (e)(1)(B),

(5) to prevent fraud and abuse with respect to amounts claimed as qualified disability expenses,

(6) under chapters 11, 12, and 13 of this title, and

(7) to allow for transfers from one ABLE account to another ABLE account.

(Added Pub. L. 113–295, div. B, title I, §102(a), Dec. 19, 2014, 128 Stat. 4056; amended Pub. L. 114–113, div. Q, title III, §303(a)–(c), Dec. 18, 2015, 129 Stat. 3087; Pub. L. 115–97, title I, §11024(a), Dec. 22, 2017, 131 Stat. 2075; Pub. L. 115–141, div. U, title I, §101(o), title IV, §401(a)(129), (130), Mar. 23, 2018, 132 Stat. 1166, 1190; Pub. L. 117–328, div. T, title I, §124(a), Dec. 29, 2022, 136 Stat. 5314.)

Amendment of Subsection (e)

Pub. L. 117–328, div. T, title I, §124, Dec. 29, 2022, 136 Stat. 5314, provided that, applicable to taxable years beginning after Dec. 31, 2025, paragraphs (1)(A) and (2)(A)(i)(II) of subsection (e) of this section are amended by striking "age 26" and inserting "age 46". See 2022 Amendment note below.

Editorial Notes

References in Text

The Stephen Beck, Jr., ABLE Act of 2014, referred to in subsec. (d)(4), is div. B of Pub. L. 113–295, Dec. 19, 2014, 128 Stat. 4056, also known as the "Stephen Beck, Jr., Achieving a Better Life Experience Act of 2014". Section 103 of div. B of Pub. L. 113–295 is set out as a note under this section.

The Social Security Act, referred to in subsecs. (e)(1)(A), (2) and (f), is act Aug. 14, 1935, ch. 531, 49 Stat. 620. Titles II, XVI, and XIX of the Act are classified generally to subchapters II (§401 et seq.), XVI (§1381 et seq.), and XIX (§1396 et seq.), respectively, of chapter 7 of Title 42, The Public Health and Welfare. Sections 1614 and 1861 of the Act are classified to sections 1382c and 1395x, respectively, of Title 42. For complete classification of this Act to the Code, see section 1305 of Title 42 and Tables.

Amendments

2022—Subsec. (e)(1)(A), (2)(A)(i)(II). Pub. L. 117–328 substituted "age 46" for "age 26".

2018—Subsec. (c)(1)(D). Pub. L. 115–141, §101(o), struck out subpar. (D) which related to operating rules.

Subsec. (d)(4). Pub. L. 115–141, §401(a)(129), substituted "Stephen Beck, Jr., ABLE Act of 2014" for "Achieving a Better Life Experience Act of 2014".

Subsec. (e)(4). Pub. L. 115–141, §401(a)(130), substituted "section 152(d)(2)(B)" for "subparagraph section 152(d)(2)(B)".

2017—Subsec. (b)(2). Pub. L. 115–97, §11024(a)(2), inserted at end of concluding provisions "A designated beneficiary (or a person acting on behalf of such beneficiary) shall maintain adequate records for purposes of ensuring, and shall be responsible for ensuring, that the requirements of subparagraph (B)(ii) are met."

Subsec. (b)(2)(B). Pub. L. 115–97, §11024(a)(1), amended subpar. (B) generally. Prior to amendment, subpar. (B) read as follows: "except in the case of contributions under subsection (c)(1)(C), if such contribution to an ABLE account would result in aggregate contributions from all contributors to the ABLE account for the taxable year exceeding the amount in effect under section 2503(b) for the calendar year in which the taxable year begins."

Subsec. (b)(7). Pub. L. 115–97, §11024(a)(3), added par. (7).

2015—Subsec. (b)(1)(B) to (D). Pub. L. 114–113, §303(a), inserted "and" at end of subpar. (B), redesignated subpar. (D) as (C), and struck out former subpar. (C) which read as follows: "which allows for the establishment of an ABLE account only for a designated beneficiary who is a resident of such State or a resident of a contracting State, and".

Subsec. (c)(1)(C)(i). Pub. L. 114–113, §303(c)(2), substituted "member of the family" for "family member".

Subsec. (d)(3). Pub. L. 114–113, §303(b)(1), struck out "and State of residence" after "the name".

Subsec. (d)(4). Pub. L. 114–113, §303(c)(1), substituted "section 103" for "section 4".

Subsec. (e)(7). Pub. L. 114–113, §303(b)(2), struck out par. (7). Text read as follows: "The term 'contracting State' means a State without a qualified ABLE program which has entered into a contract with a State with a qualified ABLE program to provide residents of the contracting State access to a qualified ABLE program."

Statutory Notes and Related Subsidiaries

Effective Date of 2022 Amendment

Pub. L. 117–328, div. T, title I, §124(b), Dec. 29, 2022, 136 Stat. 5314, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2025."

Effective Date of 2018 Amendment

Amendment by section 101(o) of Pub. L. 115–141 effective as if included in the provision of the Protecting Americans from Tax Hikes Act of 2015, div. Q of Pub. L. 114–113, to which such amendment relates, see section 101(s) of Pub. L. 115–141, set out as a note under section 24 of this title.

Effective Date of 2017 Amendment

Amendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 22, 2017, see section 11024(c) of Pub. L. 115–97, set out as a note under section 25B of this title.

Effective Date of 2015 Amendment

Pub. L. 114–113, div. Q, title III, §303(d), Dec. 18, 2015, 129 Stat. 3087, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2014."

Effective Date

Section applicable to taxable years beginning after Dec. 31, 2014, see section 102(f)(1) of Pub. L. 113–295, set out as an Effective Date of 2014 Amendment note under section 552a of Title 5, Government Organization and Employees.

Regulations

Pub. L. 113–295, div. B, title I, §102(f)(2), Dec. 19, 2014, 128 Stat. 4062, provided that: "The Secretary of the Treasury (or the Secretary's designee) shall promulgate the regulations or other guidance required under section 529A(g) of the Internal Revenue Code of 1986, as added by subsection (a), not later than 6 months after the date of the enactment of this Act [Dec. 19, 2014]."

Purposes

Pub. L. 113–295, div. B, title I, §101, Dec. 19, 2014, 128 Stat. 4056, provided that: "The purposes of this title [title I of div. B of Pub. L. 113–295, enacting this section, amending sections 26, 529, 877A, 4965, 4973, and 6693, of this title, section 552a of Title 5, Government Organization and Employees, sections 521, 541, and 707 of Title 11, Bankruptcy, and section 5517 of Title 12, Banks and Banking, and enacting provisions set out as notes under this section, section 529 of this title, section 552a of Title 5, and section 521 of Title 11] are as follows:

"(1) To encourage and assist individuals and families in saving private funds for the purpose of supporting individuals with disabilities to maintain health, independence, and quality of life.

"(2) To provide secure funding for disability-related expenses on behalf of designated beneficiaries with disabilities that will supplement, but not supplant, benefits provided through private insurance, the Medicaid program under title XIX of the Social Security Act [42 U.S.C. 1396 et seq.], the supplemental security income program under title XVI of such Act [42 U.S.C. 1381 et seq.], the beneficiary's employment, and other sources."

Treatment of ABLE Accounts Under Certain Federal Programs

Pub. L. 113–295, div. B, title I, §103, Dec. 19, 2014, 128 Stat. 4063, provided that:

"(a) Account Funds Disregarded for Purposes of Certain Other Means-Tested Federal Programs.—Notwithstanding any other provision of Federal law that requires consideration of 1 or more financial circumstances of an individual, for the purpose of determining eligibility to receive, or the amount of, any assistance or benefit authorized by such provision to be provided to or for the benefit of such individual, any amount (including earnings thereon) in the ABLE account (within the meaning of section 529A of the Internal Revenue Code of 1986) of such individual, any contributions to the ABLE account of the individual, and any distribution for qualified disability expenses (as defined in subsection (e)(5) of such section) shall be disregarded for such purpose with respect to any period during which such individual maintains, makes contributions to, or receives distributions from such ABLE account, except that, in the case of the supplemental security income program under title XVI of the Social Security Act [42 U.S.C. 1381 et seq.]—

"(1) a distribution for housing expenses (within the meaning of such subsection) shall not be so disregarded, and

"(2) in the case of such program, any amount (including such earnings) in such ABLE account shall be considered a resource of the designated beneficiary to the extent that such amount exceeds $100,000.

"(b) Suspension of SSI Benefits During Periods of Excessive Account Funds.—

"(1) In general.—The benefits of an individual under the supplemental security income program under title XVI of the Social Security Act shall not be terminated, but shall be suspended, by reason of excess resources of the individual attributable to an amount in the ABLE account (within the meaning of section 529A of the Internal Revenue Code of 1986) of the individual not disregarded under subsection (a) of this section.

"(2) No impact on medicaid eligibility.—An individual who would be receiving payment of such supplemental security income benefits but for the application of paragraph (1) shall be treated for purposes of title XIX of the Social Security Act [42 U.S.C. 1396 et seq.] as if the individual continued to be receiving payment of such benefits.

"(c) Effective Date.—This section shall take effect on the date of the enactment of this Act [Dec. 19, 2014]."

§530. Coverdell education savings accounts

(a) General rule

A Coverdell education savings account shall be exempt from taxation under this subtitle. Notwithstanding the preceding sentence, the Coverdell education savings account shall be subject to the taxes imposed by section 511 (relating to imposition of tax on unrelated business income of charitable organizations).

(b) Definitions and special rules

For purposes of this section—

(1) Coverdell education savings account

The term "Coverdell education savings account" means a trust created or organized in the United States exclusively for the purpose of paying the qualified education expenses of an individual who is the designated beneficiary of the trust (and designated as a Coverdell education savings account at the time created or organized), but only if the written governing instrument creating the trust meets the following requirements:

(A) No contribution will be accepted—

(i) unless it is in cash,

(ii) after the date on which such beneficiary attains age 18, or

(iii) except in the case of rollover contributions, if such contribution would result in aggregate contributions for the taxable year exceeding $2,000.

(B) The trustee is a bank (as defined in section 408(n)) or another person who demonstrates to the satisfaction of the Secretary that the manner in which that person will administer the trust will be consistent with the requirements of this section or who has so demonstrated with respect to any individual retirement plan.

(C) No part of the trust assets will be invested in life insurance contracts.

(D) The assets of the trust shall not be commingled with other property except in a common trust fund or common investment fund.

(E) Except as provided in subsection (d)(7), any balance to the credit of the designated beneficiary on the date on which the beneficiary attains age 30 shall be distributed within 30 days after such date to the beneficiary or, if the beneficiary dies before attaining age 30, shall be distributed within 30 days after the date of death of such beneficiary.

The age limitations in subparagraphs (A)(ii) and (E), and paragraphs (5) and (6) of subsection (d), shall not apply to any designated beneficiary with special needs (as determined under regulations prescribed by the Secretary).

(2) Qualified education expenses

(A) In general

The term "qualified education expenses" means—

(i) qualified higher education expenses (as defined in section 529(e)(3)), and

(ii) qualified elementary and secondary education expenses (as defined in paragraph (3)).

(B) Qualified tuition programs

Such term shall include any contribution to a qualified tuition program (as defined in section 529(b)) on behalf of the designated beneficiary (as defined in section 529(e)(1)); but there shall be no increase in the investment in the contract for purposes of applying section 72 by reason of any portion of such contribution which is not includible in gross income by reason of subsection (d)(2).

(3) Qualified elementary and secondary education expenses

(A) In general

The term "qualified elementary and secondary education expenses" means—

(i) expenses for tuition, fees, academic tutoring, special needs services in the case of a special needs beneficiary, books, supplies, and other equipment which are incurred in connection with the enrollment or attendance of the designated beneficiary of the trust as an elementary or secondary school student at a public, private, or religious school,

(ii) expenses for room and board, uniforms, transportation, and supplementary items and services (including extended day programs) which are required or provided by a public, private, or religious school in connection with such enrollment or attendance, and

(iii) expenses for the purchase of any computer technology or equipment or Internet access and related services, if such technology, equipment, or services are to be used by the beneficiary and the beneficiary's family during any of the years the beneficiary is in school.

Clause (iii) shall not include expenses for computer software designed for sports, games, or hobbies unless the software is predominantly educational in nature.

(B) School

The term "school" means any school which provides elementary education or secondary education (kindergarten through grade 12), as determined under State law.

(C) Computer technology or equipment

The term "computer technology or equipment" means computer software (as defined by section 197(e)(3)(B)), computer or peripheral equipment (as defined by section 168(i)(2)(B)), and fiber optic cable related to computer use.

(4) Time when contributions deemed made

An individual shall be deemed to have made a contribution to an education individual retirement account on the last day of the preceding taxable year if the contribution is made on account of such taxable year and is made not later than the time prescribed by law for filing the return for such taxable year (not including extensions thereof).

(c) Reduction in permitted contributions based on adjusted gross income

(1) In general

In the case of a contributor who is an individual, the maximum amount the contributor could otherwise make to an account under this section shall be reduced by an amount which bears the same ratio to such maximum amount as—

(A) the excess of—

(i) the contributor's modified adjusted gross income for such taxable year, over

(ii) $95,000 ($190,000 in the case of a joint return), bears to

(B) $15,000 ($30,000 in the case of a joint return).

(2) Modified adjusted gross income

For purposes of paragraph (1), the term "modified adjusted gross income" means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.

(d) Tax treatment of distributions

(1) In general

Any distribution shall be includible in the gross income of the distributee in the manner as provided in section 72.

(2) Distributions for qualified education expenses

(A) In general

No amount shall be includible in gross income under paragraph (1) if the qualified education expenses of the designated beneficiary during the taxable year are not less than the aggregate distributions during the taxable year.

(B) Distributions in excess of expenses

If such aggregate distributions exceed such expenses during the taxable year, the amount otherwise includible in gross income under paragraph (1) shall be reduced by the amount which bears the same ratio to the amount which would be includible in gross income under paragraph (1) (without regard to this subparagraph) as the qualified education expenses bear to such aggregate distributions.

(C) Coordination with American Opportunity and Lifetime Learning credits and qualified tuition programs

For purposes of subparagraph (A)—

(i) Credit coordination

The total amount of qualified education expenses with respect to an individual for the taxable year shall be reduced—

(I) as provided in section 25A(g)(2), and

(II) by the amount of such expenses which were taken into account in determining the credit allowed to the taxpayer or any other person under section 25A.

(ii) Coordination with qualified tuition programs

If, with respect to an individual for any taxable year—

(I) the aggregate distributions during such year to which subparagraph (A) and section 529(c)(3)(B) apply, exceed

(II) the total amount of qualified education expenses (after the application of clause (i)) for such year,

 the taxpayer shall allocate such expenses among such distributions for purposes of determining the amount of the exclusion under subparagraph (A) and section 529(c)(3)(B).

(D) Disallowance of excluded amounts as deduction, credit, or exclusion

No deduction, credit, or exclusion shall be allowed to the taxpayer under any other section of this chapter for any qualified education expenses to the extent taken into account in determining the amount of the exclusion under this paragraph.

(3) Special rules for applying estate and gift taxes with respect to account

Rules similar to the rules of paragraphs (2), (4), and (5) of section 529(c) shall apply for purposes of this section.

(4) Additional tax for distributions not used for educational expenses

(A) In general

The tax imposed by this chapter for any taxable year on any taxpayer who receives a payment or distribution from a Coverdell education savings account which is includible in gross income shall be increased by 10 percent of the amount which is so includible.

(B) Exceptions

Subparagraph (A) shall not apply if the payment or distribution is—

(i) made to a beneficiary (or to the estate of the designated beneficiary) on or after the death of the designated beneficiary,

(ii) attributable to the designated beneficiary's being disabled (within the meaning of section 72(m)(7)),

(iii) made on account of a scholarship, allowance, or payment described in section 25A(g)(2) received by the designated beneficiary to the extent the amount of the payment or distribution does not exceed the amount of the scholarship, allowance, or payment,

(iv) made on account of the attendance of the designated beneficiary at the United States Military Academy, the United States Naval Academy, the United States Air Force Academy, the United States Coast Guard Academy, or the United States Merchant Marine Academy, to the extent that the amount of the payment or distribution does not exceed the costs of advanced education (as defined by section 2005(e)(3) of title 10, United States Code, as in effect on the date of the enactment of this section) attributable to such attendance, or

(v) an amount which is includible in gross income solely by application of paragraph (2)(C)(i)(II) for the taxable year.

(C) Contributions returned before certain date

Subparagraph (A) shall not apply to the distribution of any contribution made during a taxable year on behalf of the designated beneficiary if—

(i) such distribution is made before the first day of the sixth month of the taxable year following the taxable year, and

(ii) such distribution is accompanied by the amount of net income attributable to such excess contribution.

Any net income described in clause (ii) shall be included in gross income for the taxable year in which such excess contribution was made.

(5) Rollover contributions

Paragraph (1) shall not apply to any amount paid or distributed from a Coverdell education savings account to the extent that the amount received is paid, not later than the 60th day after the date of such payment or distribution, into another Coverdell education savings account for the benefit of the same beneficiary or a member of the family (within the meaning of section 529(e)(2)) of such beneficiary who has not attained age 30 as of such date. The preceding sentence shall not apply to any payment or distribution if it applied to any prior payment or distribution during the 12-month period ending on the date of the payment or distribution.

(6) Change in beneficiary

Any change in the beneficiary of a Coverdell education savings account shall not be treated as a distribution for purposes of paragraph (1) if the new beneficiary is a member of the family (as so defined) of the old beneficiary and has not attained age 30 as of the date of such change.

(7) Special rules for death and divorce

Rules similar to the rules of paragraphs (7) and (8) of section 220(f) shall apply. In applying the preceding sentence, members of the family (as so defined) of the designated beneficiary shall be treated in the same manner as the spouse under such paragraph (8).

(8) Deemed distribution on required distribution date

In any case in which a distribution is required under subsection (b)(1)(E), any balance to the credit of a designated beneficiary as of the close of the 30-day period referred to in such subsection for making such distribution shall be deemed distributed at the close of such period.

(9) Military death gratuity

(A) In general

For purposes of this section, the term "rollover contribution" includes a contribution to a Coverdell education savings account made before the end of the 1-year period beginning on the date on which the contributor receives an amount under section 1477 of title 10, United States Code, or section 1967 of title 38 of such Code, with respect to a person, to the extent that such contribution does not exceed—

(i) the sum of the amounts received during such period by such contributor under such sections with respect to such person, reduced by

(ii) the amounts so received which were contributed to a Roth IRA under section 408A(e)(2) or to another Coverdell education savings account.

(B) Annual limit on number of rollovers not to apply

The last sentence of paragraph (5) shall not apply with respect to amounts treated as a rollover by subparagraph (A).

(C) Application of section 72

For purposes of applying section 72 in the case of a distribution which is includible in gross income under paragraph (1), the amount treated as a rollover by reason of subparagraph (A) shall be treated as investment in the contract.

(e) Tax treatment of accounts

Rules similar to the rules of paragraphs (2) and (4) of section 408(e) shall apply to any Coverdell education savings account.

(f) Community property laws

This section shall be applied without regard to any community property laws.

(g) Custodial accounts

For purposes of this section, a custodial account shall be treated as a trust if the assets of such account are held by a bank (as defined in section 408(n)) or another person who demonstrates, to the satisfaction of the Secretary, that the manner in which he will administer the account will be consistent with the requirements of this section, and if the custodial account would, except for the fact that it is not a trust, constitute an account described in subsection (b)(1). For purposes of this title, in the case of a custodial account treated as a trust by reason of the preceding sentence, the custodian of such account shall be treated as the trustee thereof.

(h) Reports

The trustee of a Coverdell education savings account shall make such reports regarding such account to the Secretary and to the beneficiary of the account with respect to contributions, distributions, and such other matters as the Secretary may require. The reports required by this subsection shall be filed at such time and in such manner and furnished to such individuals at such time and in such manner as may be required.

(Added Pub. L. 105–34, title II, §213(a), Aug. 5, 1997, 111 Stat. 813; amended Pub. L. 105–206, title VI, §6004(d)(1)–(3)(A), (5)–(8), July 22, 1998, 112 Stat. 793, 794; Pub. L. 106–554, §1(a)(7) [title III, §319(6)], Dec. 21, 2000, 114 Stat. 2763, 2763A-646; Pub. L. 107–16, title IV, §§401(a)(1), (b)–(g)(1), (2)(C), 402(a)(4)(A), (C), June 7, 2001, 115 Stat. 57–61; Pub. L. 107–22, §1(a)(1)–(5), July 26, 2001, 115 Stat. 196; Pub. L. 107–147, title IV, §411(f), Mar. 9, 2002, 116 Stat. 46; Pub. L. 108–121, title I, §107(a), Nov. 11, 2003, 117 Stat. 1339; Pub. L. 108–311, title IV, §§404(a), 406(b), Oct. 4, 2004, 118 Stat. 1188, 1189; Pub. L. 109–135, title IV, §412(ff), Dec. 21, 2005, 119 Stat. 2639; Pub. L. 110–245, title I, §109(c), June 17, 2008, 122 Stat. 1632; Pub. L. 115–141, div. U, title I, §101(l)(16), title IV, §401(a)(131), (b)(23), Mar. 23, 2018, 132 Stat. 1165, 1190, 1203.)

Editorial Notes

References in Text

The date of the enactment of this section, referred to in subsec. (d)(4)(B)(iv), is the date of enactment of Pub. L. 105–34, which enacted this section and was approved Aug. 5, 1997.

Amendments

2018—Subsec. (b)(3)(A)(iii). Pub. L. 115–141, §401(b)(23)(A), struck out "(as defined in section 170(e)(6)(F)(i))" before "or Internet".

Subsec. (b)(3)(C). Pub. L. 115–141, §401(b)(23)(B), added subpar. (C).

Subsec. (d)(2)(C). Pub. L. 115–141, §101(l)(16), substituted "American Opportunity" for "Hope" in heading.

Subsec. (d)(9)(B). Pub. L. 115–141, §401(a)(131), substituted "by" for "by the".

2008—Subsec. (d)(9). Pub. L. 110–245 added par. (9).

2005—Subsec. (b)(2)(A)(ii). Pub. L. 109–135, §412(ff)(2), substituted "paragraph (3)" for "paragraph (4)".

Subsec. (b)(3) to (5). Pub. L. 109–135, §412(ff)(1), redesignated pars. (4) and (5) as (3) and (4), respectively, and struck out former par. (3) which read as follows: "The term 'eligible educational institution' has the meaning given such term by section 529(e)(5)."

2004—Subsec. (d)(2)(C)(i). Pub. L. 108–311, §404(a), struck out "higher" after "qualified" in introductory provisions.

Subsec. (d)(4)(B)(iii). Pub. L. 108–311, §406(b), substituted "designated beneficiary" for "account holder".

2003—Subsec. (d)(4)(B)(iv), (v). Pub. L. 108–121 added cl. (iv) and redesignated former cl. (iv) as (v).

2002—Subsec. (d)(4)(B)(iv). Pub. L. 107–147 substituted "by application of paragraph (2)(C)(i)(II)" for "because the taxpayer elected under paragraph (2)(C) to waive the application of paragraph (2)".

2001—Pub. L. 107–22, §1(a)(5), amended section catchline generally, substituting "Coverdell education savings" for "Education individual retirement".

Subsec. (a). Pub. L. 107–22, §1(a)(2), substituted "A Coverdell education savings account" for "An education individual retirement account" and "the Coverdell education savings account" for "the education individual retirement account".

Subsec. (b)(1). Pub. L. 107–22, §1(a)(1), (3), in heading, substituted "Coverdell education savings account" for "Education individual retirement account" and, in introductory provisions, substituted " 'Coverdell education savings account' " for " 'education individual retirement account' " and "designated as a Coverdell education savings account" for "designated as an education individual retirement account".

Pub. L. 107–16, §401(d), inserted concluding provisions.

Pub. L. 107–16, §401(c)(3)(A), struck out "higher" before "education expenses" in introductory provisions.

Subsec. (b)(1)(A)(iii). Pub. L. 107–16, §401(a)(1), substituted "$2,000" for "$500".

Subsec. (b)(2). Pub. L. 107–16, §401(c)(1), amended heading and text of par. (2) generally, substituting present provisions for provisions which defined "qualified higher education expenses" as having the meaning given such term by section 529(e)(3), reduced as provided in section 25A(g)(2), and including amounts paid or incurred to purchase tuition credits or certificates, or to make contributions to an account, under a qualified State tuition program for the benefit of the beneficiary of the account.

Subsec. (b)(2)(B). Pub. L. 107–16, §402(a)(4)(A), (C), in heading, substituted "Qualified tuition" for "Qualified State tuition" and in text, substituted "qualified tuition" for "qualified State tuition".

Subsec. (b)(4). Pub. L. 107–16, §401(c)(2), added par. (4).

Subsec. (b)(5). Pub. L. 107–16, §401(f)(1), added par. (5).

Subsec. (c)(1). Pub. L. 107–16, §401(e), substituted "In the case of a contributor who is an individual, the maximum amount the contributor" for "The maximum amount which a contributor" in introductory provisions.

Subsec. (c)(1)(A)(ii). Pub. L. 107–16, §401(b)(1), substituted "$190,000" for "$150,000".

Subsec. (c)(1)(B). Pub. L. 107–16, §401(b)(2), substituted "$30,000" for "$10,000".

Subsec. (d)(2). Pub. L. 107–16, §401(c)(3)(B), struck out "higher" before "education" in heading.

Subsec. (d)(2)(A), (B). Pub. L. 107–16, §401(c)(3)(A), struck out "higher" before "education".

Subsec. (d)(2)(C). Pub. L. 107–16, §401(g)(1), amended heading and text of subpar. (C) generally. Prior to amendment, text read as follows: "A taxpayer may elect to waive the application of this paragraph for any taxable year."

Subsec. (d)(2)(D). Pub. L. 107–16, §401(g)(2)(C), in heading, substituted "deduction, credit, or exclusion" for "credit or deduction" and in text, substituted ", credit, or exclusion" for "or credit".

Subsec. (d)(4)(A). Pub. L. 107–22, §1(a)(1), substituted "a Coverdell education savings account" for "an education individual retirement account".

Subsec. (d)(4)(C). Pub. L. 107–16, §401(f)(2)(B), substituted "certain date" for "due date of return" in heading.

Subsec. (d)(4)(C)(i). Pub. L. 107–16, §401(f)(2)(A), added cl. (i) and struck out former cl. (i) which read as follows: "such distribution is made on or before the day prescribed by law (including extensions of time) for filing the beneficiary's return of tax for the taxable year or, if the beneficiary is not required to file such a return, the 15th day of the 4th month of the taxable year following the taxable year; and".

Subsec. (d)(5). Pub. L. 107–22, §1(a)(1), (4), substituted "distributed from a Coverdell education savings account" for "distributed from an education individual retirement account" and "another Coverdell education savings account" for "another education individual retirement account".

Subsec. (d)(6). Pub. L. 107–22, §1(a)(1), substituted "a Coverdell education savings account" for "an education individual retirement account".

Subsec. (e). Pub. L. 107–22, §1(a)(4), substituted "Coverdell education savings account" for "education individual retirement account".

Subsec. (h). Pub. L. 107–22, §1(a)(1), substituted "a Coverdell education savings account" for "an education individual retirement account".

2000—Subsec. (d)(4)(B)(iii). Pub. L. 106–554 substituted a comma for a semicolon before "or" at end.

1998—Subsec. (b)(1). Pub. L. 105–206, §6004(d)(1), inserted "an individual who is" before "the designated beneficiary" in introductory provisions.

Subsec. (b)(1)(E). Pub. L. 105–206, §6004(d)(2)(A), amended subpar. (E) generally. Prior to amendment, subpar. (E) read as follows: "Upon the death of the designated beneficiary, any balance to the credit of the beneficiary shall be distributed within 30 days after the date of death to the estate of such beneficiary."

Subsec. (d)(1). Pub. L. 105–206, §6004(d)(3)(A), substituted "section 72" for "section 72(b)".

Subsec. (d)(2)(D). Pub. L. 105–206, §6004(d)(5), added subpar. (D).

Subsec. (d)(4)(B)(iv). Pub. L. 105–206, §6004(d)(6), added cl. (iv).

Subsec. (d)(4)(C). Pub. L. 105–206, §6004(d)(7), substituted "Contributions" for "Excess contributions" in heading and amended text of introductory provisions and cl. (i) generally. Prior to amendment, text read as follows: "Subparagraph (A) shall not apply to the distribution of any contribution made during a taxable year on behalf of a designated beneficiary to the extent that such contribution exceeds $500 if—

"(i) such distribution is received on or before the day prescribed by law (including extensions of time) for filing such contributor's return for such taxable year, and".

Subsec. (d)(5). Pub. L. 105–206, §6004(d)(8)(A), added first sentence and struck out former first sentence which read as follows: "Paragraph (1) shall not apply to any amount paid or distributed from an education individual retirement account to the extent that the amount received is paid into another education individual retirement account for the benefit of the same beneficiary or a member of the family (within the meaning of section 529(e)(2)) of such beneficiary not later than the 60th day after the date of such payment or distribution."

Subsec. (d)(6). Pub. L. 105–206, §6004(d)(8)(B), inserted before period at end "and has not attained age 30 as of the date of such change".

Subsec. (d)(7). Pub. L. 105–206, §6004(d)(2)(B), inserted at end "In applying the preceding sentence, members of the family (as so defined) of the designated beneficiary shall be treated in the same manner as the spouse under such paragraph (8)."

Subsec. (d)(8). Pub. L. 105–206, §6004(d)(2)(C), added par. (8).

Statutory Notes and Related Subsidiaries

Effective Date of 2018 Amendment

Amendment by section 101(l)(16) of Pub. L. 115–141 effective as if included in the provision of the Protecting Americans from Tax Hikes Act of 2015, div. Q of Pub. L. 114–113, to which such amendment relates, see section 101(s) of Pub. L. 115–141, set out as a note under section 24 of this title.

Effective Date of 2008 Amendment

Amendment by Pub. L. 110–245 applicable with respect to deaths from injuries occurring on or after June 17, 2008, with provision for application of amendment to deaths from injuries occurring on or after Oct. 7, 2001, and before June 17, 2008, see section 109(d)(1), (2) of Pub. L. 110–245, set out as a note under section 408A of this title.

Effective Date of 2004 Amendment

Amendment by section 404(a) of Pub. L. 108–311 effective as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16, to which such amendment relates, see section 404(f) of Pub. L. 108–311, set out as a note under section 45A of this title.

Amendment by section 406(b) of Pub. L. 108–311 effective as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 406(h) of Pub. L. 108–311, set out as a note under section 55 of this title.

Effective Date of 2003 Amendment

Pub. L. 108–121, title I, §107(b), Nov. 11, 2003, 117 Stat. 1339, provided that: "The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2002."

Effective Date of 2002 Amendment

Amendment by Pub. L. 107–147 effective as if included in the provisions of the Economic Growth and Tax Relief Reconciliation Act of 2001, Pub. L. 107–16, to which such amendment relates, see section 411(x) of Pub. L. 107–147, set out as a note under section 25B of this title.

Effective Date of 2001 Amendment

Amendment by Pub. L. 107–22 effective July 26, 2001, see section 1(c) of Pub. L. 107–22, set out as a note under section 26 of this title.

Amendment by section 401(a)(1), (b)–(g)(1), (2)(C) of Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 401(h) of Pub. L. 107–16, set out as a note under section 25A of this title.

Amendment by section 402(a)(4)(A), (C) of Pub. L. 107–16 applicable to taxable years beginning after Dec. 31, 2001, see section 402(h) of Pub. L. 107–16, set out as a note under section 72 of this title.

Effective Date of 1998 Amendment

Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date

Section applicable to taxable years beginning after Dec. 31, 1997, see section 213(f) of Pub. L. 105–34, set out as an Effective Date of 1997 Amendment note under section 26 of this title.

Savings Provision

For provisions that nothing in amendment by section 401(b)(23) of Pub. L. 115–141 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Mar. 23, 2018, for purposes of determining liability for tax for periods ending after Mar. 23, 2018, see section 401(e) of Pub. L. 115–141, set out as a note under section 23 of this title.