To amend the Internal Revenue Code of 1986 to provide for tax preferred savings accounts for individuals under age 26, and for other purposes.

Summary: Kids IRA Act of 2008 (K-IRA) - Amends the Internal Revenue Code to establish young savers account for individual taxpayers under age 26. Treats such accounts as Roth individual retirement accounts (Roth IRAs) for income tax purposes. Allows a tax deduction for contributions to young savers accounts, up to $5,000 a taxable year.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Kids IRA Act of 2008 (K-IRA)''.

SEC. 2. YOUNG SAVERS ACCOUNT.

    (a) Establishment of Accounts.--
            (1) In general.--Section 408A of the Internal Revenue Code 
        of 1986 (relating to Roth IRAs) is amended by adding at the end 
        the following new subsection:
    ``(g) Young Savers Account.--
            ``(1) In general.--Except as provided in this subsection, a 
        young savers account shall be treated in the same manner as a 
        Roth IRA.
            ``(2) Young savers account.--For purposes of this 
        subsection, the term `young savers account' means, with respect 
        to any taxable year, a Roth IRA which is established and 
        maintained on behalf of an individual who has not attained age 
        26 before the close of the taxable year.
            ``(3) Contribution limits.--In the case of any 
        contributions for any taxable year to 1 or more young savers 
        accounts established and maintained on behalf of an individual, 
        each of the following contribution limits for the taxable year 
        shall be increased as follows:
                    ``(A) The contribution limit applicable to the 
                individual under subsection (c)(2) shall be increased 
                by the aggregate amount of qualified young saver 
                contributions to such accounts for the taxable year.
                    ``(B) The contribution limits applicable to the 
                young savers accounts under subsection (a)(1) or 
                (b)(2)(B) of section 408, whichever is applicable, 
                shall be increased by the deductible amount in effect 
                under section 219(b)(5) for such taxable year 
                (determined without regard to subparagraph (B) 
                thereof).
            ``(4) Qualified contributions.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `qualified young saver 
                contribution' means a contribution by an individual 
                (with respect to whom a young savers account is not 
                established and maintained during the taxable year) to 
                a young savers account established and maintained on 
                behalf of another individual.
                    ``(B) Limitations.--
                            ``(i) Limit on accounts with respect to 
                        individual.--The aggregate amount of 
                        contributions which may be made for any taxable 
                        year to all young savers accounts established 
                        and maintained on behalf of an individual shall 
                        not exceed the deductible amount in effect for 
                        the taxable year under section 219(b)(5) 
                        (determined without regard to subparagraph (B) 
                        thereof).
                            ``(ii) Limit on contributors.--The 
                        aggregate amount of qualified contributions an 
                        individual may make for any taxable year to all 
                        young savers accounts shall not exceed the 
                        deductible amount in effect for the taxable 
                        year under section 219(b)(5) (determined 
                        without regard to subparagraph (B) thereof).''.
    (b) Partial Deductibility of Qualified Young Saver Contributions.--
Section 219 of such Code (relating to retirement savings) is amended by 
adding at the end the following new subsection:
    ``(f) Qualified Young Saver Contributions.--
            ``(1) In general.--The amount allowable as a deduction 
        under this section (determined without regard to this 
        subsection) to any individual for any taxable year shall be 
        increased by an amount equal to 20 percent of so much of the 
        qualified young saver contributions (as defined in section 
        408A(g)) made by such individual for such taxable year as does 
        not exceed $5,000.
            ``(2) Limit based on modified adjusted gross income.--The 
        amount determined under paragraph (1) shall be reduced in the 
        same manner as under section 408A(c)(3)(A), except that the 
        applicable dollar amount shall be--
                    ``(A) in the case of a taxpayer filing a joint 
                return, $315,000,
                    ``(B) in the case of any other taxpayer (other than 
                a married individual filing a separate return), 
                $200,000, and
                    ``(C) in the case of a married individual filing a 
                separate return, zero.
            ``(3) Inflation adjustment.--In the case of any taxable 
        year beginning in a calendar year after 2009, the dollar 
        amounts in subparagraphs (A) and (B) of paragraph (2) shall 
        each be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for the calendar year in which 
                the taxable year begins, determined by substituting 
                `calendar year 2008' for `calendar year 1992' in 
                subparagraph (B) thereof.
        Any increase determined under the preceding sentence shall be 
        rounded to the nearest multiple of $1,000.''.
    (c) Conforming Amendment.--Paragraph (1) of section 408A(c) of such 
Code (relating to no deduction allowed) is amended by striking ``No 
deduction'' and inserting ``Except as provided in section 219(f), no 
deduction''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2008.