Big Changes Coming to 529 Plans: What Families Need to Know

zlkcpa
Sep 11
3 min read

Starting in 2026, families will have much more flexibility when using 529 plan funds, thanks to the One Big Beautiful Bill Act (OBBBA). These updates expand how 529 accounts can be used and increase the annual withdrawal limit for K-12 expenses.

Let’s break down what this means for parents, grandparents, students, and even career-changers.

Higher Withdrawal Limits for K-12

Until now, 529 funds could be used for up to $10,000 per year, per student for K-12 tuition only. Beginning in tax year 2026, that cap doubles to $20,000 annually.

Even better, the list of “qualified” expenses is expanding beyond tuition. Families will now be able to use 529 dollars for:

Books and instructional materials
Online learning tools
Tutoring services (with new qualification rules)
Standardized testing fees (SAT, ACT, AP, etc.)
Dual-enrollment college courses
Educational therapies

Tutoring Requirements to Know

To qualify, tutoring must meet certain criteria:

Tutors cannot be family members
Sessions must take place outside the home or at a qualified facility
Tutors must meet professional qualifications (federal guidance coming soon)
Services must directly support curriculum or test prep

Who Benefits Most?

These expanded rules create opportunities for many families:

Private school families – Can now use more funds each year for tuition and related costs.
Students with special learning needs – Educational therapies and tutoring can be funded tax-free.
Homeschool families – Books, curriculum, and online resources now qualify.
High school students in dual-enrollment programs – College-level classes are covered.
Adult learners and professionals – 529 plans now extend beyond traditional schooling.

Beyond K-12: Career and Credential Programs

OBBBA makes 529s more than just a college savings tool. Funds can now be used tax-free for professional credentials and continuing education, including:

Workforce Innovation and Opportunity Act (WIOA) programs
Military certifications
State-licensed credentials (cosmetology, HVAC, massage therapy, etc.)
Apprenticeships and approved career programs

This shift means 529 plans can support lifelong learning and career development, not just a four-year degree.

Important Dates

July 5, 2025 – Expanded categories of K-12 and credentialing expenses become eligible.
Tax year 2026 – The new $20,000 annual cap for K-12 withdrawals takes effect.

Things to Watch

State tax conformity – Not all states automatically follow federal changes. For example, California and New York have historically been slower to update their rules. Depending on where you live, some expenses may still be considered non-qualified at the state level.
Financial aid impact – Using more 529 funds during K-12 years could reduce what’s left for college, which may affect aid calculations.
Estate and gift planning – Contributions to 529s continue to qualify for gift tax exclusions, with options to “front load” contributions over five years for larger gifts.

What Families Should Do Now

Plan ahead – If you have children in K-12, consider how the new $20,000 limit could fit into your education strategy.
Think long-term – With career programs now included, 529 plans can support education at every stage of life.
Check your state rules – Federal tax-free doesn’t always mean state tax-free.
Review gifting opportunities – 529s remain a smart way for grandparents and other family members to contribute.

Final Takeaway

The new rules significantly broaden how families can use 529 plans, turning them into a flexible tool for K-12 education, college, and even career training. Whether you’re planning for private school, specialized therapies, homeschooling, or professional credentials, 529s now offer more opportunities to support your child, or yourself, throughout the learning journey.

If you’d like to review how these changes could fit into your family’s education and financial plan, the team at Kamish & Associates is here to help.