401(Kids) Education Savings Account Modernization Act of 2016

To amend the Internal Revenue Code of 1986 to improve and expand Coverdell education savings accounts. 1. Short title This Act may be cited as the 401(Kids) Education Savings Account Modernization Act of 2016 2. Elimination of income-based reduction in permitted contributions by non-custodians to Coverdell education savings accounts (a) In general Paragraph (1) of section 530(c) who is an individual who is an individual and is the custodial parent of the designated beneficiary (b) Effective date The amendment made by this section shall apply to contributions in taxable years beginning after December 31, 2016. 3. Increase in annual contribution limitation for Coverdell education savings accounts (a) In general Subparagraph (A) of section 530(b)(1) (1) by striking $2,000 the dollar amount in effect under section 2503(b) (relating to exclusion from gifts) for the taxable year (2) by striking or (3) by striking the period at the end of clause (iii) and inserting , or (4) by adding at the end the following new clause: (iv) if such contribution would result in aggregate contributions for the taxable year exceeding $5,500 from any one donor. . (b) Effective date The amendments made by this section shall apply to contributions made in taxable years beginning after December 31, 2016. 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) (C) Private school For purposes of this section, the term private school . (b) Effective date The amendment made by this section shall apply to taxable years beginning after December 31, 2016. 5. Qualified rollover contributions from Coverdell education savings accounts to Roth IRAs (a) In general Paragraph (5) of section 530(d) , or into a Roth IRA of the beneficiary (but only to the extent such amount does not exceed $10,000) as of such date (b) Conforming amendment; technical correction Paragraph (1) of section 408A(e) (1) In general The term qualified rollover contribution (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, 2016. 6. 401Kids.gov The Secretary of Education shall establish an Internet website (to be known as 401Kids.gov

Summary: 401(Kids) Education Savings Account Modernization Act of 2016 This bill amends the Internal Revenue Code to: (1) limit the requirement for an income-based reduction in allowable contributions to a Coverdell education savings account to an individual who is the custodial parent of an account beneficiary (thus exempting non-custodians of the beneficiary from such reduction), (2) increase the annual contribution limit for such accounts, (3) allow the use of such an account to pay home school expenses, and (4) allow tax-free rollovers of amounts in a Coverdell education savings account to a Roth individual retirement account. The Department of Education shall establish a website (to be known as 401Kids.gov) to provide free information on tax-favored education savings accounts.