The One Big Beautiful Bill Act (OBBBA) brings significant updates to 529 college savings plans—expanding the types of expenses that now qualify for tax-free withdrawals.
Overview of 529 Plans
A 529 plan is a tax-advantaged savings account designed to help families save for education. Contributions grow tax-free, and withdrawals are also tax-free when used for qualified education expenses. These plans are typically sponsored by states and can be used by parents, grandparents, or anyone supporting a student’s education.
Who Should Consider Contributing
529 plans are great for:
- Parents saving for their children’s K–12 or college education
- Grandparents looking to leave a legacy
- Adults planning for continuing education or career changes
- Anyone supporting a loved one’s educational journey
Qualified Expenses Before OBBBA
Prior to OBBBA, 529 plan funds could be used for:
- Tuition, fees, books, and supplies at eligible colleges and universities
- Room and board for students enrolled at least half-time
- Up to $10,000 per year in K–12 tuition expenses
- Student loan repayment (up to $10,000 lifetime per beneficiary)
Expanded Coverage Under OBBBA
The OBBB significantly broadens the scope of qualified expenses:
- K–12 and Homeschooling: Now includes educational materials, technology, tutoring, and extracurricular activities. Homeschooling families can use 529 funds for a wider range of curriculum and learning tools.
- Postsecondary Credentialing: Covers expenses related to professional credentials, such as CPA exam fees, prep courses, and licensing costs for trades and professions.
These changes make 529 plans more useful for a wider range of education paths, not just traditional college degrees. Whether you’re homeschooling, earning a trade certification, or pursuing a professional license, your 529 funds can now be used to cover more of the real costs involved.
For more details on what qualifies, see the 529 Plans: Questions and answers | Internal Revenue Service
