SB 364

This bill creates an an individual income tax deduction for any amount

contributed to a Coverdell Education Savings Account (CESA), in the year in which

the contribution is made, subject to the limits and conditions specified in federal law

for contributions to a CESA. Currently, the maximum allowable contribution to a

CESA is $2,000 each year per beneficiary, although that contribution amount phases

down as a contributor's modified adjusted gross income (MAGI) increases from

$95,000 to $110,000, or from $190,000 to $220,000 for a married couple filing jointly.

No contributions are allowed once a contributor's MAGI is above the phase-out

range.

Under federal law, contributions to a CESA must be made in cash, are not tax

deductible, and may not be made once the beneficiary reaches the age of 18. The

accounts themselves are exempt from taxation, and the proceeds of an account must

be used for qualified education expenses, as defined under federal law, for a

designated beneficiary. Qualified education expenses include certain elementary,

secondary, and higher education expenses.

Because this bill relates to an exemption from state or local taxes, it may be

referred to the Joint Survey Committee on Tax Exemptions for a report to be printed

as an appendix to the bill.