Big Beautiful Bill expands 529 Plans

The Big Beautiful Bill expanded the uses of 529 Plans and continues the policy trend of making them easier and more attractive to use.

529 Plans are investment accounts funded by after-tax dollars where the earnings grow tax-free and withdrawals for qualified education expenses are also tax-free. Withdrawals for non-qualified expenses are taxed as ordinary income, plus a 10 percent penalty on earnings.

The updates fall into three main categories:

Expanded K-12 Expenses for 529 Plans

Beginning Jan. 1, 2026, the current $10,000 annual limit for K-12 tuition increases to $20,000. 529 Plan funds can be used at public, private and religious elementary or secondary schools. 

Starting immediately, 529 Plan funds can be used on non-tuition expenses like books and online learning materials.

Perhaps most notably, 529 Plan funds can now be used immediately for:

• Tutoring fees
• Standardized test fees (like the ACT or SAT)
• Dual enrollment fees for college courses taken in high school
• Educational therapies such as physical, occupational, behavioral, and speech-language

To qualify, tutors can’t be related to the student and must be either a current or former teacher at an eligible educational institution, a licensed teacher, or a subject matter expert in their field. Educational therapists must be licensed or accredited.

Postsecondary Credentials

529 funds can now be used for expenses from credential programs, such as tuition, books and fees, including those for testing to maintain or renew a certification or license.

Examples include licensing exams for fields like accounting, finance and law, and certification for trades like plumbing, electrical, cosmetology, etc.

To qualify, credential programs must be one of the following:

• Authorized by the Workforce Innovation and Opportunity Act
• Listed in the VA’s WEAMS database (for military credentials)
• Approved by the federal or state government

ABLE account rollovers from 529 Plans

Rollovers from 529s into ABLE accounts, which were previously set to expire at the end of 2025, are now permanently allowed.

ABLE accounts are tax-advantaged investment accounts designed to help individuals with disabilities cover qualified disability-related expenses without impacting their eligibility for certain government benefits.