Family Education Assistance Act of 1992

Family Education Assistance Act of 1992 - Amends the Internal Revenue Code to allow an individual income tax deduction for contributions to a savings account or prepaid tuition contract established to pay the educational expenses (tuition, supplies, meals, and lodging) of the taxpayer's child or certain other relatives at an institution of higher education or a vocational school. Limits the deduction to $1,500 annually (adjusted for inflation) for each account or contract. Disallows the deduction for contributions to an account maintained for any individual aged 24 or older. Requires any account balance to be distributed after the beneficiary attains age 30.

Permits an exclusion from the gross income of the contributor or the beneficiary of account distributions used to pay educational expenses of the latter.

Exempts an account from taxation (except for the tax on unrelated business income of a charitable organization), unless a contributor or the beneficiary engages in specified prohibited transactions in connection with it.

Imposes a ten percent surtax on distributions not used for educational purposes.

Requires the account trustee to report to the Secretary of the Treasury and to the account's beneficiary concerning the account. Imposes a penalty for failure to report.

Allows taxpayers who do not otherwise itemize deductions to deduct for contributions to an education savings account.

Imposes penalty taxes in connection with excess contributions or prohibited transactions associated with an account.

Excludes from gross income amounts received by individuals from certain prepaid tuition plans.

Treats program income derived by a State or agency from State prepaid tuition plans as income derived from the exercise of an essential governmental function.