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1 (August 23, 2001)

handle is hein.crs/crsmthaazth0001 and id is 1 raw text is: Order Code RS20289 Updated August 23, 2001 Education Savings Accounts for Elementary and Secondary Education Bob Lyke and James B. Stedman Specialists in Social Legislation Domestic Social Policy Division Summary The Taxpayer Relief Act of 1997 (P.L. 105-34) authorized new education savings accounts (then called education IRAs) for higher education expenses. From the time of enactment, attempts were made to increase the $500 annual contribution limit and allow accounts to be used for elementary and secondary education, including private and religious schools. Legislation to accomplish these objectives passed in both the 105th and 106th Congresses but was vetoed by President Clinton. The Economic Growth and Tax Relief Reconciliation Act of 2001 (P.L. 107-16) that President Bush signed on June 7, 2001, includes these changes, effective after 2001. The most prominent issue they raise is whether the federal government should assist families whose children are educated in private schools. Policy questions include what effect such assistance might have on public schools and student performance and whether it would be constitutional. Concerns have also been expressed that the legislation would create compliance problems and is most likely to benefit better-off families. P.L. 107-22 renamed the accounts Coverdell education savings accounts. Current Law for 2001 Coverdell education savings accounts are investment accounts for individuals that families can use to save for higher education expenses. The accounts were authorized by the Taxpayer Relief Act of 1997 (P.L. 105-34) along with other measures to help parents and students pay college costs; they were then called education individual retirement accounts (education IRAs). Contributions to Coverdell education savings accounts can be made until beneficiaries are age 18; the annual limit is $500 per beneficiary, though this amount is reduced and then eliminated for contributors with modified adjusted gross incomes between $95,000 and $110,000 ($150,000 and $160,000 for joint returns). Contributions may not be made in any year if they are also made to a qualified state tuition savings plan for the same beneficiary. Contributions are not deductible, but accounts are exempt from taxation and distributions are excluded from beneficiaries' gross income if Congressional Research Service +. The Library of Congress CRS Report for Congress Received through the CRS Web

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