ACE Act

The ACE Act would expand what families can pay for with tax-free money from 529 education savings plans. Currently, these plans allow up to $10,000 per year in tax-free withdrawals for K-12 tuition. This bill would increase that limit to $20,000 and expand eligible expenses to include homeschooling tuition, curriculum, books, online materials, tutoring, testing fees, dual enrollment fees, and educational therapies for students with disabilities. The bill would also increase the annual gift tax exclusion for 529 contributions by $20,000, allowing families to contribute more money to these accounts without gift tax consequences.

The bill includes a separate provision that would limit the federal tax exclusion for interest on state and local bonds. Under this proposal, only bonds issued by states that meet certain school choice requirements would qualify for the tax benefit. This could affect how states and local governments finance their operations and could have implications for municipal bond investors.

The bill is currently in the committee stage and has not yet been voted on by the full Senate, so these changes would only take effect if the bill passes both chambers and is signed into law.