Beyond Tuition: How 529 Plans Are Evolving with the Times

For years, 529 college savings plans have been one of the most tax-efficient ways for you to save for education. They allow you to invest for future schooling costs, with earnings growing tax-free and withdrawals staying tax-free as long as the money is used for qualified education expenses.

For quite some time now, 529 plans have allowed for considerable flexibility. Uses included traditional college costs, some K–12 tuition, and even student loan repayment. In July, the One Big Beautiful Bill Act (OBBBA) was passed under President Trump, expanding those options and making 529 plans more versatile than ever. These changes open the door for more families, including homeschoolers and those pursuing non-traditional education paths, to benefit.

Traditionally, 529 funds could be used for tuition, fees, books, and supplies at accredited colleges, graduate programs, community colleges, and trade schools. Room and board also qualified for students enrolled at least half-time, within the school’s cost-of-attendance limits. For K–12, families could use up to $10,000 per year per student for tuition at public, private, or religious schools. Other eligible uses included required technology, approved apprenticeship costs, up to $10,000 lifetime toward student loan repayment, and rollovers of up to $35,000 lifetime to a Roth IRA under certain conditions.

Under the OBBBA, eligible K–12 uses have broadened. In addition to tuition, families can now use529 funds for curriculum materials, online learning platforms, qualified tutoring, standardized test fees, and certain educational therapies. Most notably, starting next year, the annual withdrawal limit for K–12 expenses will double from $10,000 to $20,000 per student, granting significantly more flexibility to cover educational costs at the elementary and secondary level.

The bill also expands coverage for career and vocational training. 529s can now be used for a wider range of workforce programs, vocational credentials, and continuing education courses. Qualified costs include tuition, materials, testing, and equipment(if recognized by federal, state, or military credentialing systems).

Another notable change is that rollovers from 529 accounts to ABLE accounts, which are tax-advantaged savings for individuals with disabilities, are now a permanent option. This allows unused funds to be transferred without taxes or penalties.

These updates give you more ways to use your savings without worrying about triggering a penalty. Whether your student’s path leads to a four-year degree, homeschool coursework, or a career-focused program, a 529 plan now offers more flexibility to meet those needs.

As always, state tax rules may differ from federal law, so it’s important to check your state’s treatment before making withdrawals. Keep receipts and documentation, and make sure withdrawals match expenses in the same calendar year to avoid unnecessary penalties.

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