H.R. 750 — ACE Act

This section expands the definition of qualified higher education expenses under section 529 plans (i.e., tax-advantaged savings plans for qualified education expenses) to include additional elementary and secondary expenses for public, private, religious schools, or homeschools—specifically, in addition to tuition: (1) curriculum and curricular materials; (2) books or other instructional materials; (3) online educational materials; (4) tuition for tutoring or educational classes outside the home by a qualified, unrelated instructor (i.e., licensed teacher, prior teacher at an eligible institution, or subject matter expert); (5) fees for nationally standardized norm-referenced achievement tests, advanced placement examinations, or college/university admission examinations; (6) dual enrollment fees for institutions of higher education; and (7) educational therapies for students with disabilities (e.g., occupational, behavioral, physical, speech-language) provided by licensed or accredited practitioners. The amendments apply to distributions made after the date of enactment.

This section increases the annual limit on tax-free distributions from qualified tuition programs (529 plans) for elementary and secondary school tuition to $20,000 (from $10,000) per beneficiary for taxable years beginning after December 31, 2024.

This section increases the annual gift tax exclusion amount under IRC §2503(b) for gifts to any person by up to $20,000 based on the amount of contributions during the calendar year to qualified tuition programs (i.e., 529 plans) for which such person is the designated beneficiary, effective for gifts made after December 31, 2024. (Thus, a donor may make tax-free gifts of up to the regular annual exclusion amount—$19,000 in 2025—plus up to an additional $20,000 to such a 529 plan per beneficiary per year.)

This section restricts the tax exemption for interest on state and local bonds under IRC §103(a) to bonds issued by a minimum school choice state (i.e., a state that has enacted school choice programs—tax credit scholarship programs, voucher programs, education savings account programs, or refundable tax credits for private education expenses—under which at least 40% of specified school-age children, or individuals under age 18, are eligible and average per-pupil spending on eligible children is at least 60% of spending on non-eligible children) or its political subdivisions. For minimum school choice states not meeting heightened requirements (65% eligibility and spending on eligible children at least 75% of spending on non-eligible children), the exemption applies only to 50% of the interest. The restriction applies to bonds issued after enactment. (Thus, states lacking qualifying school choice programs lose full access to lower-cost tax-exempt bond financing.)