(1) IN GENERAL.—Part VII of subchapter B of 
chapter 1 of the Internal Revenue Code of 1986 is 
amended by redesignating section 224 as section 
225 and by inserting after section 223 the following 
new section: 
‘‘SEC. 224. CONTRIBUTIONS TO 529 PLANS AND ABLE AC-
COUNTS. 
‘‘(a) ALLOWANCE OF DEDUCTION.—In the case of an 
individual, there shall be allowed as a deduction for the 
taxable year an amount equal to the sum of— 
‘‘(1) the aggregate contributions made by such 
individual to qualified tuition programs (as defined 
in section 529) during such taxable year, and 
‘‘(2) the aggregate contributions made by such 
individual to ABLE accounts (as defined in section 
529A) during such taxable year. 
‘‘(b) LIMITATION.—The amount allowed as a deduc-
tion by subsection (a) for a taxable year shall not exceed 
$5,000.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part VII of subchapter B of chapter 1 of 
such Code is amended by redesignating the item re-
lating to section 224 as an item relating to section 
225 and by inserting after the item relating to sec-
tion 223 the following new item: 
‘‘Sec. 224. Contributions to 529 plans and ABLE accounts.’’. 
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(e) EFFECTIVE DATE.—The amendments made by 
this section shall apply to contributions made during tax-
able years beginning after the date of the enactment of 
this Act. 
SEC. 3. ADDITIONAL TAX FOR DISTRIBUTIONS NOT USED 
FOR QUALIFIED PURPOSES. 
(a) QUALIFIED TUITION PROGRAMS.— 
(1) IN GENERAL.—The first sentence of section 
529(c)(6) of the Internal Revenue Code of 1986 is 
amended by striking the period at the end and in-
serting ‘‘, except that the rate of such tax shall be 
determined under subparagraph (B) of this para-
graph.’’. 
(2) RATE.—Paragraph (6) of section 529(c) of 
such Code, as amended by subsection (a), is amend-
ed— 
(A) by striking ‘‘The tax’’ and inserting 
‘‘(A) IN GENERAL.—The tax’’, and 
(B) by adding at the end the following: 
‘‘(B) RATE.—For purposes of subpara-
graph (A), the tax rate determined under this 
subparagraph is the greater of— 
‘‘(i) 10 percent, and 
‘‘(ii) the highest rate of income tax 
applicable to such person under this title.’’. 
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(b) QUALIFIED ABLE PROGRAMS.— 
(1) IN GENERAL.—Subparagraph (A) of section 
529A(c)(3) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘10 percent’’ and inserting 
‘‘the applicable percentage’’. 
(2) APPLICABLE PERCENTAGE.—Paragraph (3) 
of section 529A(c) of such Code is amended by add-
ing at the end the following: 
‘‘(D) 
APPLICABLE
PERCENTAGE.—For 
purposes of this paragraph, the term ‘applicable 
percentage’ means the greater of— 
‘‘(i) 10 percent, and 
‘‘(ii) the highest rate of income tax 
applicable to such person under this title.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to distributions made during tax-
able years beginning after the date of the enactment of 
this Act. 
Æ 
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