HR3186-119

What This Bill Does

The Universal Savings Account Act creates a new tax-preferred account under Internal Revenue Code section 530A. A Universal Savings Account is a U.S. trust or custodial account for one individual, designated at creation, with cash-only contributions other than qualified rollovers, a bank or approved trustee, nonforfeitable ownership, no commingling except common funds, and no life insurance investment. The account is generally exempt from income tax except unrelated business income tax. Annual contributions are capped at 10,000 dollars plus 500 dollars for each calendar year after 2024 before the contribution year, then inflation adjusted after 2025, with an overall 25,000 dollar cap that also inflation adjusts. Distributions are generally excluded from gross income, except net income tied to excess contributions. Rollovers between accounts of the same beneficiary must be completed within 60 days. A surviving spouse can step into the account holder's position; otherwise the account is treated as distributed at death. Trustees must report contributions, distributions, and other required matters to Treasury and beneficiaries. The bill adds Universal Savings Accounts to excess-contribution, prohibited-transaction, and reporting-penalty rules and applies to taxable years beginning after December 31, 2024.

Who Benefits and How

Individual savers benefit because Universal Savings Account distributions are generally tax-free and can be used without retirement, education, or medical-purpose limits. Middle-income families benefit from flexible after-tax savings that can be tapped for emergencies, housing, education, or other needs. Banks and approved trustees benefit from a new account product they can administer. Financial advisers benefit from a new tax-preferred savings vehicle to offer clients. Surviving spouses benefit because inherited accounts can continue as if the spouse were the account holder.

Who Bears the Burden and How

IRS guidance staff must define account designation, trustee approval, reporting, excess contribution, rollover, and death-treatment rules. Account trustees must report contributions, distributions, and other required information to Treasury and beneficiaries. Taxpayers making excess contributions must track corrections or face excise taxes. Treasury revenue accounts bear the cost of tax-free growth and tax-free distributions.

Key Provisions

• Creates tax-exempt Universal Savings Accounts under new section 530A.
• Limits cash contributions to 10,000 dollars plus annual increases, subject to a 25,000 dollar cap and inflation adjustments.
• Excludes most Universal Savings Account distributions from gross income.
• Provides 60-day rollover treatment and surviving-spouse continuation.
• Applies excess-contribution, prohibited-transaction, trustee reporting, and penalty rules beginning after 2024.