H.R. 3186 creates a new type of tax-advantaged savings account called a Universal Savings Account (USA) that allows individuals to save money with tax-free growth and withdrawals. Americans can contribute up to $10,000 annually starting in 2025, with the limit increasing by $500 each year and adjusted for inflation after 2025, capped at a maximum of $25,000 per year (also adjusted for inflation). Contributions must be in cash and deposited into accounts held by banks or other approved trustees, with funds kept separate from other assets and prohibited from being invested in life insurance. Distributions from these accounts are tax-free, and any money can be rolled over to another Universal Savings Account within 60 days. The bill takes effect for tax years beginning after December 31, 2024, and includes penalties for excess contributions and requirements for trustees to report account activity to the IRS.
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