Skill Savings Account Act of 2026

Tax-Free Contributions and Distributions: The bill allows for contributions made by employees or employers to be excluded from gross income, and distributions used for qualified education expenses are also excluded from grosss income. This provides a tax advantage for saving for education. (Section 2(a))

Support for Eligible Employees: The bill defines an eligible employee as someone employed in the United States who is not a dependent of another taxpayer, providing a specific pathway for workers to save for education. (Section 2(b))

Financial Security of Account Interests: The law states that the interest of an individual in the balance of their account is nonforfeitable, ensuring that the saved funds belong to the individual. (Section 2(d)(5))

Contribution Limits: There are strict limits on how much can be contributed without being taxed; employer contributions are capped at $5,250 (after considering other exclusions), and aggregate employee contributions cannot exceed $10,000. (Section 2(c))

Penalties for Non-Educational Use: If money is taken out of the account for anything other than qualified education expenses, it must be included in the beneficiary's gross income, and individuals under age 65 will face an additional 20 percent tax on that amount. (Section 2(f)(1)-(2))

Strict Contribution Rules: To maintain the account, contributions must be made in cash, and the trust assets cannot be invested in life insurance contracts. (Section 2(d)(1)-(4))