A bill to amend the Internal Revenue Code of 1954 to allow a limited credit for contributions to education savings accounts established for the children of the taxpayer and to exclude amounts received from such accounts for educational expenses from income tax, and for other purposes.

Amends the Internal Revenue Code to allow an income tax credit for contributions made to a savings account established to pay the educational expenses of the taxpayer's dependent child at an institution of higher education or a vocational school.

Limits the amount of such credit to $500 for each eligible student. Disallows such credit to any individual who has a taxable income greater than $60,000 for the taxable year. Provides for cost-of-living adjustments to such amounts.

Allows an income tax exclusion for income earned by such education savings accounts provided such accounts are used exclusively for educational expenses. Sets forth penalties for the use of account funds for other than educational purposes. Requires the distribution of unused account assets to contributors when the beneficiary attains age 26. Includes such distributions in the gross income of contributors receiving such distributions.

Requires that the trustee of an education savings account file reports with the Secretary of the Treasury on the maintenance of the account. Imposes penalties for not filing required reports.