Individual Development Account Demonstration Act

Individual Development Account Demonstration Act - Amends the Internal Revenue Code to allow a deduction for contributions made to an individual development account (IDA) by or on behalf of a qualified individual to pay qualified expenses of such individual. Limits such contributions to $2,000 per year. Defines qualified expenses as those for: (1) postsecondary educational expenses; (2) a first-home purchase; and (3) retirement. Allows such deduction in arriving at adjusted gross income. Declares that contributions to IDAs are not subject to the gift tax or the tax on prohibited transactions.

Provides for the establishment of demonstration projects designed to determine: (1) the social, psychological, and economic effects of providing to individuals with limited means an opportunity to accumulate assets; and (2) the extent to which an asset-based welfare policy may be used to enable individuals with low income to achieve economic self-sufficiency.

Makes an individual eligible for assistance under a demonstration project if such individual is a member of a household that meets: (1) the income test of not more than 200 percent of the poverty threshold; and (2) the net worth test of not more than $20,000.