Universal Savings Account Act of 2025
Sponsored By: Representative Rep. Harshbarger, Diana [R-TN-1]
Introduced
Summary
Universal Savings Accounts (USAs) would create a new tax-preferred trust account in the Internal Revenue Code so individuals can save in a specially designed, tax-advantaged vehicle with set rules on contributions, trustees, rollovers, death, reporting, and penalties. It would apply to taxable years beginning after December 31, 2024.
Show full summary
- Families and individual savers: Holders generally get tax-free distributions, but net income tied to excess contributions is taxable in the year the contribution was made. If a surviving spouse acquires the account it remains a USA, otherwise the balance is treated as distributed at death.
- Contribution limits and rollovers: Annual caps start at $10,000 plus $500 for each calendar year after 2024 and are indexed for inflation. Qualified rollovers from one USA to another are allowed if completed within 60 days.
- Trustees, reporting, and enforcement: Trustees must be banks or approved administrators and must report contributions and distributions to the IRS and beneficiaries. The bill adds USAs to existing excess-contribution and prohibited-transaction rules so excess contributions and certain transactions trigger established tax penalties and compliance provisions.
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Bill Overview
Analyzed Economic Effects
4 provisions identified: 3 benefits, 1 costs, 0 mixed.
Higher yearly limit for Universal Savings contributions
This bill would set one yearly limit across all your Universal Savings Accounts. It would start at $10,000 and rise by $500 each year after 2024. Starting in 2026, the amount would also adjust for inflation, with increases rounded down to the nearest $100. The yearly limit could not be more than $25,000, and after 2025 that cap would also adjust for inflation. This would apply to taxable years starting after December 31, 2024.
New tax-free Universal Savings Account
This bill would let you open a Universal Savings Account for one person. Most withdrawals would not be taxed. If you put in more than allowed, the net income tied to that extra would be taxed in the year you overcontributed. You could roll money to another Universal Savings Account for the same person within 60 days without using your yearly limit. If you die, a spouse who inherits would step in as the account holder; other heirs would be treated as if the account paid out at death. These changes would apply to taxable years starting after December 31, 2024.
Rules and protections for Universal Savings Accounts
This bill would set guardrails for Universal Savings Accounts. Contributions (except qualified rollovers) must be in cash and within the yearly limit. Trustees must be banks or other approved providers, keep your interest nonforfeitable, avoid commingling, and cannot buy life insurance with account funds. Providers must report to the IRS and to you; penalties could apply if they fail. Prohibited‑transaction rules and excise taxes would apply to these accounts to deter improper deals. These rules would apply to taxable years starting after December 31, 2024.
Tax on Universal Savings overcontributions
This bill would impose an excise tax if you contribute more than your yearly Universal Savings limit. The excess for a year would include new overages plus any prior excess not cleared by withdrawals or unused room. If you take out the extra amount and its earnings by your tax return due date, it would not count as excess. Rollovers would not count toward the excess test. This would apply to taxable years starting after December 31, 2024.
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Sponsors & CoSponsors
Sponsor
Rep. Harshbarger, Diana [R-TN-1]
TN • R
Cosponsors
There are no cosponsors for this bill.
Roll Call Votes
No roll call votes available for this bill.
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