401(Kids) Education Savings Account Act of 2014

Summary: 401(Kids) Education Savings Account Act of 2014 - Amends the Internal Revenue Code to: (1) eliminate after 2014 the income-based reduction of contributions to Coverdell education savings accounts, (2) increase the annual contribution limit for such accounts, (3) allow the use of such an account to pay home school expenses and the acquisition costs of a first-time homebuyer, and (4) allow tax-free rollovers of amounts in a Coverdell education savings account to a Roth individual retirement account (Roth IRA). 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``401(Kids) Education Savings Account 
Act of 2014''.

SEC. 2. ELIMINATION OF INCOME-BASED REDUCTION IN PERMITTED 
              CONTRIBUTIONS TO COVERDELL EDUCATION SAVINGS ACCOUNTS.

    Paragraph (1) of section 530(c) of the Internal Revenue Code of 
1986 is amended by striking ``to an account under this section'' and 
inserting ``to an account under this section in a taxable year 
beginning before January 1, 2015,''.

SEC. 3. INCREASE IN ANNUAL CONTRIBUTION LIMITATION FOR COVERDELL 
              EDUCATION SAVINGS ACCOUNTS.

    (a) In General.--Clause (iii) of section 530(b)(1)(A) of the 
Internal Revenue Code of 1986 is amended by striking ``$2,000'' and 
inserting ``the dollar amount in effect under section 2503(b) (relating 
to exclusion from gifts) for the taxable year''.
    (b) Effective Date.--The amendment made by this section shall apply 
to contributions made in taxable years beginning after December 31, 
2014.

SEC. 4. ALLOWANCE OF HOME SCHOOL EXPENSES AS QUALIFIED EDUCATION 
              EXPENSES FOR PURPOSES OF A COVERDELL EDUCATION SAVINGS 
              ACCOUNT.

    (a) In General.--Paragraph (3) of section 530(b) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(C) Private school.--For purposes of this 
                section, the term `private school' includes any home 
                school that meets the requirements of State law 
                applicable to such home schools, whether or not such 
                school is deemed a private school for purposes of State 
                law.''.
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after December 31, 2014.

SEC. 5. QUALIFIED DISTRIBUTIONS FROM A COVERDELL EDUCATION SAVINGS 
              ACCOUNT FOR FIRST HOME PURCHASES.

    (a) In General.--Paragraph (1) of section 530(b) of the Internal 
Revenue Code of 1986 is amended by striking ``qualified education 
expenses'' and inserting ``qualified expenses''.
    (b) Qualified Expenses.--Subsection (b) of section 530 of the 
Internal Revenue Code of 1986, as amended by this Act, is amended by 
redesignating paragraphs (2), (3), and (4) as paragraphs (4), (5), and 
(6), respectively, and by inserting after paragraph (1) the following 
new paragraphs:
            ``(2) Qualified expenses.--The term `qualified expenses' 
        means--
                    ``(A) qualified first-time homebuyer expenses, and
                    ``(B) qualified education expenses.
            ``(3) Qualified first-time homebuyer expenses.--
                    ``(A) In general.--The term `qualified first-time 
                homebuyer expenses' means, in the case of a designated 
                beneficiary who is a first-time homebuyer, the 
                qualified acquisition costs with respect to a principal 
                residence of such beneficiary.
                    ``(B) Definitions.--The terms `first-time 
                homebuyer', `qualified acquisition costs', and 
                `principal residence' have the same meaning as when 
                used in section 72(t)(8).''.
    (c) Conforming Amendments.--
            (1) Paragraph (4)(A)(ii) of section 530(b) of the Internal 
        Revenue Code of 1986, as redesignated by subsection (b), is 
        amended by striking ``as defined in paragraph (3)'' and 
        inserting ``as defined in paragraph (5)''.
            (2) Subparagraphs (A), (B), and (D) of section 530(d)(1) of 
        such Code are each amended by striking ``qualified education 
        expenses'' each place it appears and inserting ``qualified 
        expenses''.
            (3) The heading of paragraph (2) of section 530(d) of such 
        Code is amended by striking ``education expenses'' and 
        inserting ``expenses''.
            (4) The heading of paragraph (4) of section 530(d) of such 
        Code is amended by striking ``educational expenses'' and 
        inserting ``expenses''.
            (5) Subclause (I) of section 529(c)(3)(B)(vi) of such Code 
        is amended by striking ``to which clauses (i) and (ii) and 
        section 530(d)(2)(A) apply'' and inserting ``for qualified 
        higher education expenses to which clauses (i) and (ii) apply 
        and for qualified education expenses to which section 
        530(d)(2)(A) applies''.
            (6) Clause (vi) of section 529(c)(3)(B) of such Code is 
        amended by striking ``and section 530(d)(2)(A).'' and inserting 
        ``and the amount of the exclusion with respect to qualified 
        education expenses under section 530(d)(2)(A).''.
    (d) Effective Date.--The amendments made by this section shall 
apply to distributions made in taxable years beginning after December 
31, 2014.

SEC. 6. QUALIFIED ROLLOVER CONTRIBUTIONS FROM COVERDELL EDUCATION 
              SAVINGS ACCOUNTS TO ROTH IRAS.

    (a) In General.--Paragraph (5) of section 530(d) of the Internal 
Revenue Code of 1986 is amended by inserting ``, or into a Roth IRA of 
the beneficiary'' after ``as of such date''.
    (b) Conforming Amendment; Technical Correction.--Paragraph (1) of 
section 408A(e) of the Internal Revenue Code of 1986 is amended to read 
as follows:
            ``(1) In general.--The term `qualified rollover 
        contribution' means a rollover contribution to a Roth IRA from 
        another such account, from an eligible retirement plan (as 
        defined in section 402(c)(8)(B)), or from a Coverdell education 
        savings account (as defined in section 530(b)(1)), but only 
        if--
                    ``(A) such rollover contribution meets the 
                requirements of section 408(d)(3),
                    ``(B) in the case of a rollover contribution from 
                an eligible retirement plan described in clause (iii), 
                (iv), (v), or (vi) of section 402(c)(8)(B), such 
                contribution meets the requirements of section 402(c), 
                403(b)(8), or 457(e)(16), whichever is applicable, and
                    ``(C) in the case of a rollover contribution from a 
                Coverdell education savings account, such contribution 
                meets the requirements of section 530(d)(5).
        For purposes of section 408(d)(3)(B), there shall be 
        disregarded any qualified rollover contribution from an 
        individual retirement plan (other than a Roth IRA) to a Roth 
        IRA.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to rollover contributions made in taxable years beginning after 
December 31, 2014.