Retirement, 529 accounts would be expanded under new GOP tax plan

  • While lawmakers are still working on exactly what would go into the legislation, proposals include eliminating the age cap for IRA contributions and expanding what 529 funds can be used for.
  • Republican leaders are indicating they want to vote on so-called Tax Reform 2.0 this month.
Savings in a piggy bank, Retirement money
Image Source | Getty Images

House Republicans are moving closer to introducing tax legislation that would make changes to savings accounts that Americans rely on for retirement, education and more.

The House Ways and Means Committee on Thursday provided Republicans with an updated version of what will be included in so-called Tax Reform 2.0, which largely aims to make the tax cuts for individuals permanent (they currently are scheduled to expire at the end of 2025).

It also would lock in changes to tax deductions, including the controversial $10,000 cap on state and local taxes.

Noteworthy proposals affecting savings include:

  • Removing the age limit on IRA contributions. Currently, account owners cannot make additional contributions beginning in the year they turn 70½. Roth IRAs, by contrast, do not have a contribution age limit.
  • Allowing families to access their retirement accounts, penalty-free, for costs related to a new child, whether by birth or adoption.
  • Creating a new Universal Savings Account that would allow savers to set aside tax-advantaged money for basically anything. These accounts, which Congress has explored in the past, would come without restrictions on when (or why) the owners can make use of it.
  • Allowing 529 education accounts to be used to cover the cost of home-schooling, for fees related to a trade apprenticeship and to help pay off student debt.

With details slim and lawmakers still working on the legislation, it's unclear exactly what will end up being included. GOP leaders have indicated they want a floor vote on it this month.

The measure would cost $627 billion over a decade, according to a Joint Committee on Taxation analysis. The first tax bill came with a $1 trillion price tag.

WATCH: Tax Reform 2.0 proposal released by House panel