Skill Savings Account Act of 2026
- Bill Number
- H.R. 8714
- Origin Chamber
- House
- Congress
- 119th Congress, Session 2
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2026-05-07: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-05-15T18:25:51Z
AI-Generated Summary
Purpose
The Skill Savings Account Act of 2026 (H.R. 8714) amends the Internal Revenue Code to create tax-advantaged "skill savings accounts." These accounts allow employees and employers to save and use funds for job-related education expenses without owing taxes on qualifying contributions or withdrawals.
Key Provisions
- Eligibility: Available to U.S. employees who are not claimed as dependents on someone else's tax return.
- Tax Exclusion:
- Contributions by the employee (up to $10,000 per year) or employer (up to $5,250 per year, reduced by any other employer education benefits under existing law) are excluded from taxable income (gross income means income subject to tax).
- Withdrawals used solely for qualified education expenses (job skills training or courses, similar to employer-provided education assistance) are also tax-free.
- Account Rules:
- Must be a U.S.-based trust managed by a bank, insurance company, or approved entity.
- Accepts only cash contributions; assets cannot be mixed with non-account funds (except shared investment pools) or invested in life insurance.
- Account balance belongs fully to the employee (nonforfeitable).
- Penalties for Misuse:
- Non-qualified withdrawals are taxed as income; plus a 20% penalty if the employee is under age 65.
- Excess contributions (over limits) can be withdrawn penalty-free before tax filing deadline, but any earnings on them are taxed.
- Other Rules:
- Accounts are tax-exempt while qualifying.
- Trustees must report contributions, withdrawals, and other details to the IRS and account holder.
- Treasury Secretary must issue implementation rules within 1 year.
- Effective Date: Applies to tax years starting after December 31, 2025.
Significant Changes to Existing Law
- Adds new Internal Revenue Code Section 139M for skill savings accounts, modeled after rules for trusts like IRAs but focused on job skills education.
- Links to Section 127 (existing employer education benefits, up to $5,250 tax-free annually).
- Expands Section 4973 to impose a 6% annual excise tax on excess contributions to these accounts until corrected.
Potential Impacts
- Employees: Easier tax-free saving for career training, potentially improving job skills and wages.
- Employers: Incentive to contribute to employee development without tax costs, possibly aiding retention and upskilling.
- Government: Increased IRS oversight and reporting; modest revenue loss from tax exclusions but potential economic gains from skilled workforce.
- Financial Institutions: New role as account trustees, creating business opportunities.
Main Stakeholders
- Employees: Primary beneficiaries, especially non-dependents seeking job training.
- Employers: Can contribute tax-free, supporting workforce development.
- Financial Institutions: Banks and insurers acting as trustees.
- IRS/Treasury Department: Responsible for enforcement, reporting, and regulations.
Notable Legal, Constitutional, or Political Implications
- Legal: Builds on existing tax exclusions for education (e.g., Section 127), reducing litigation risk; clarifies excess contribution handling to prevent abuse.
- Constitutional: Relies on Congress's power to regulate taxes, with no apparent free speech, due process, or federalism issues.
- Political: Bipartisan sponsorship (Rep. Thompson, R-PA; Rep. Bonamici, D-OR); promotes workforce skills without broad spending, fitting fiscal conservative and labor priorities. Referred to House Ways and Means Committee for tax policy review.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Rep. Thompson, Glenn [R-PA-15]
Cosponsors (1)
Rep. Bonamici, Suzanne [D-OR-1]
Recent Actions
- 2026-05-07: Referred to the House Committee on Ways and Means.
- 2026-05-07: Introduced in House
- 2026-05-07: Introduced in House
Bill Versions
- Skill Savings Account Act of 2026 — issued 2026-05-07 — PDF (8 pages)