Level All Team
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September 15, 2026
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5 min
The One Big Beautiful Bill Act, signed into law on July 4, 2025, turned the 529 college savings plan into something much broader — a tax-advantaged account families can now use from kindergarten through career. Starting in 2026, the annual withdrawal limit for K-12 expenses doubled from $10,000 to $20,000, the definition of qualifying expenses expanded to include tutoring, textbooks, dual enrollment, and educational therapy, and 529 funds can now be used for professional credentials, trade certifications, and licensed career training programs. If your family has a 529 account — or has been debating opening one — the rules that existed when you last checked have changed.
As of January 1, 2026, the annual 529 withdrawal limit for K-12 education expenses doubled from $10,000 to $20,000 per student.
Starting July 5, 2025, qualifying K-12 expenses expanded beyond tuition to include textbooks, tutoring, online learning tools, standardized test fees, dual enrollment courses, and educational therapy for students with disabilities.
529 funds can now be used for career credentialing programs — including welding, nursing, CDL training, and professional licensing exams — as long as the program qualifies under the Workforce Innovation and Opportunity Act (WIOA) or is recognized by a state or federal agency.
Graduate PLUS Loans were eliminated for new borrowers on July 1, 2026, making 529 plans a more important planning tool for graduate and professional students.
State tax treatment of the new rules varies — not all states have conformed, so check your state before making withdrawals for newly eligible expenses.
A 529 plan is a tax-advantaged savings account designed to help families cover educational costs. Contributions grow tax-free, and withdrawals used for qualified education expenses are also tax-free at the federal level. More than 30 states also offer a state income tax deduction or credit for contributions. The accounts are state-managed and are not affected by the federal Department of Education restructuring — they are regulated by the IRS and by individual state laws.
Anyone can open a 529 — parents, grandparents, aunts, uncles, or the student themselves. You can change the beneficiary to another qualifying family member if the original beneficiary doesn’t use the funds, and you can contribute up to five years’ worth of the annual gift tax exclusion in a lump sum. In 2026, that allows a single contributor to put in up to $95,000 per beneficiary at once, or a married couple up to $190,000, without triggering the gift tax.
Did the K-12 withdrawal limit actually double?
Yes. Starting January 1, 2026, families can withdraw up to $20,000 per year from a 529 account for K-12 educational expenses, up from the previous $10,000 annual cap. This applies at the federal level to public, private, and religious schools.
Just as important as the higher limit is the expanded definition of what counts as a qualified K-12 expense. Before the OBBBA, only tuition at K–12 schools qualified. Since July 5, 2025, the list also includes:
This means a family paying for an SAT prep course, AP exam fees, or a licensed occupational therapist for a child with a learning disability can now use 529 funds tax-free for those expenses — up to $20,000 per year.
One caution: state tax conformity varies. California and New York, for example, have historically been slow to align with federal 529 rule expansions. If you live in a state with a strict definition of qualified expenses, a withdrawal that is federally tax-free may still trigger state taxes. Check your state’s 529 rules or consult a tax professional before making withdrawals for newly eligible expenses.
Yes — and this is one of the most significant changes for families who aren’t on a four-year college path.** Under the OBBBA, 529 funds can now be used for credential programs, professional licensing exams, and career training programs that are not offered by traditional colleges or universities.
Eligible programs include those authorized under the Workforce Innovation and Opportunity Act (WIOA), certificates from registered apprenticeship programs, and licenses issued or recognized by a state or federal agency. Qualified expenses include tuition, fees, books, supplies, equipment, and testing fees required to earn or maintain a credential.
In practice, this covers programs like welding certifications, commercial driver’s license (CDL) training, cosmetology school, plumbing apprenticeships, coding bootcamps authorized under WIOA, CPA exam fees, and bar exam fees.
Not every career training program qualifies. Bootcamps and short-term programs that are not affiliated with recognized credentialing organizations or WIOA-authorized programs do not qualify. Be careful of programs that are not accredited or seem to be brand new.
The option to roll over unused 529 funds into a Roth IRA — introduced under SECURE 2.0 — remains available and works alongside the new rules. Families can roll over up to $35,000 from a 529 plan to a Roth IRA over the beneficiary’s lifetime. Each year’s rollover is capped at the annual Roth IRA contribution limit ($7,500 in 2026) and reduced by any other IRA contributions the beneficiary makes that year. The 529 account must have been open for at least 15 years, and the funds being rolled must have been in the account for at least five years.
This provision matters for families who oversaved or whose student received a scholarship. Rather than paying taxes and penalties on unused funds, those dollars can flow into a Roth IRA and compound for retirement.
The federal student loan changes that took effect July 1, 2026, directly increase the importance of 529 planning. Graduate PLUS Loans — which allowed graduate students to borrow up to the full cost of attendance — no longer exist for new borrowers. Graduate students are now capped at $20,500 per year in federal loans, and Parent PLUS Loans are capped at $20,000 per year.
For families whose students are heading into expensive graduate or professional programs, the gap between federal loan limits and program costs will need to be covered by private loans, fellowships, employer tuition benefits, or pre-saved funds — including 529 accounts. A family that saved aggressively in a 529 is meaningfully better positioned than one relying entirely on federal loans. Continue to prioritize the 529 plan, as well as looking for scholarships, studentships, and other ways to cut costs.
The OBBBA also introduced a new savings vehicle sometimes called a “Trump Account,” which allows contributions of up to $5,000 per year on an after-tax basis. Trump Accounts can be used for retirement, a first-time home purchase, or education savings.
For pure education savings, most financial planning experts continue to recommend 529 plans over Trump Accounts because 529 investments grow tax-free and withdrawals for qualified expenses are also tax-free. Trump Account earnings are taxable upon withdrawal, and investment options are more limited. For education savings, the 529 plan is still the best option for most savers.
The expanded rules create planning opportunities that didn’t exist before. A few concrete steps worth considering:
If your student is still in high school, the doubled K–12 limit and expanded qualifying expenses mean you can use 529 funds for SAT prep, AP exam fees, dual enrollment, and specialized tutoring up to $20,000 per year — without touching the funds set aside for college.
If you have an adult learner or career-changer in the family, the credential and licensing expansion opens 529 access for trade programs and professional certification costs.
If you’ve overfunded a 529, you now have more ways to put excess funds to use: change the beneficiary to another family member, use funds for newly eligible credential programs, or roll up to $35,000 over a lifetime into a Roth IRA.
Before making any withdrawal for a newly eligible expense, confirm it qualifies under both federal rules and your state’s specific treatment. State conformity laws can differ meaningfully, and a non-qualifying withdrawal will be taxed as ordinary income plus a 10% penalty.
Can I use a 529 plan to pay for AP exams and SAT prep?
Yes, starting July 5, 2025. Standardized test fees — including AP exams, SAT, and ACT — are now federally qualified K-12 expenses under the OBBBA. The annual withdrawal limit for K-12 expenses is $20,000 per student as of January 1, 2026. Check whether your state has conformed to the new federal rules before withdrawing.
Does the $20,000 K-12 annual limit apply separately from the college savings?
Yes. The $20,000 annual K-12 withdrawal limit is separate from any funds used for college. A family can use up to $20,000 per year for qualifying K-12 expenses while the rest of the account continues to grow for higher education costs.
What career training programs qualify for 529 withdrawals?
Programs must be authorized under the Workforce Innovation and Opportunity Act (WIOA), registered apprenticeship programs, or licensed by a state or federal agency. This covers many trade certifications, CDL programs, cosmetology programs, and licensing exams (CPA, bar exam). Programs with no affiliation to recognized credentialing organizations generally do not qualify.
What if my student doesn’t go to college and doesn’t use the 529 funds?
You have several options. You can change the beneficiary to another qualifying family member. You can use the funds for eligible career credentials. You can roll over up to $35,000 lifetime into a Roth IRA (subject to rules including a 15-year account age minimum). If none of those apply, withdrawals for non-qualified expenses are subject to ordinary income tax plus a 10% penalty on earnings.
Are 529 plans safe from the Department of Education’s restructuring?
Yes. 529 plans are state-managed and regulated by the IRS, not the Department of Education. The OBBBA’s changes to 529 rules are tax law changes, not education department policy — so they are not affected by federal agency restructuring.
Level All covers financial aid, college planning, and career preparation for students and families. This article draws on guidance from Chase Wealth Management, CNBC, the College Board, savingforcollege.com, and official updates from state 529 plan administrators.
