New rules for 529 college savings plans have been enacted in recent years. After several significant changes in 2024, there are major updates to report in 2026.
While funding a 529 plan has long been an excellent way for families to contribute to saving for college in a tax-advantaged way, recent rule changes have expanded the benefits and made 529 plans even more attractive.
529 Rules Changes for 2026
The One Big Beautiful Bill Act (H.R. 1), signed into law on July 4, 2025, made significant changes to 529 plans that take effect in 2026 and beyond. Here are the key updates:
K-12 Annual Limit Doubles to $20,000
Starting January 1, 2026, the annual withdrawal limit for K-12 education expenses increases from $10,000 to $20,000 per student. This allows families to use more 529 funds for elementary and secondary education costs.
Expanded K-12 Qualified Expenses (Effective July 5, 2025)
Beyond tuition, 529 funds can now be used tax-free for:
- Curriculum materials (textbooks, workbooks, digital learning tools)
- Tutoring services (by qualified tutors)
- Online education platforms or subscriptions
- Educational therapies for students with disabilities
- Standardized test fees (SAT, ACT, AP exams)
- Dual-enrollment tuition for college courses taken during high school
Important: While these changes apply at the federal level, not all states have conformed to the new rules. Some states may still treat the expanded K-12 expenses as non-qualified for state tax purposes. Check your state’s 529 plan rules before making withdrawals for newly eligible expenses.
Postsecondary Credentialing Programs (Effective July 5, 2025)
529 plans can now be used for career credentialing programs such as welding, plumbing, cosmetology, CDL training, and professional licenses (CPA, bar exam, etc.). Eligible expenses include tuition, testing fees, books, equipment, and continuing education required to obtain or maintain credentials.
ABLE Account Provisions Made Permanent
Tax-free rollovers from 529 plans to ABLE accounts, previously set to expire December 31, 2025, are now permanent. The ABLE-to-Work contribution provision and Saver’s Credit eligibility for ABLE contributions are also now permanent.
Other Recent 529 Plan Updates
Tax and regulation changes and interpretations are consistently updated for improved understanding and implementation. 529 plan updates are no exception, so here are some of the more recent updates that impact 529 plan holders and those thinking about opening a 529 savings plan.
Qualified education expenses include those that you can pay for out of a 529 savings account. These are primarily educational expenses, but that definition has been broadened over the years.
529-to-Roth IRA Rollover
One of the hesitations as to why parents and others may not have contributed to a 529 plan in the past is that there were limitations on how those funds could be used. Funds could only be withdrawn for qualified expenses related to education. And any non-qualified withdrawals were subject to normal income tax plus a 10% federal tax penalty.
But what if your child decided not to go to college, or they received scholarships or other financial aid and didn’t require all the funds in your 529 account?
The recent 2024 rule change has had a big impact. It allows 529 plan beneficiaries to transfer unused funds without a penalty or paying taxes.
Secure 2.0 Act
Under the Secure 2.0 Act, the IRS tax code allows tax and penalty-free 529-to-Roth IRA rollovers starting in 2024, provided certain conditions are met. The conditions include:
- Beneficiaries are allowed to roll over up to $35,000 over their lifetime into a Roth IRA in their name (not the original 529 account holder’s name).
- This limit is subject to the annual Roth IRA contribution limit, which is $7,500 in 2026.
- The 529 account must have been open for more than 15 years.
- Funds cannot be rolled into a Roth IRA until 5 years after the funds were contributed or earned.
This change will give families and students more options to avoid penalties and retain their savings. It will also allow families to save for education expenses and retirement at the same time. However, there is still more to understand about this added flexibility.
The states administer 529 plans, and each state has its own process. Therefore, working with an informed tax professional in your state is important before rolling over any funds.
529 Plans Can Be Used For K-12 Education
In 2017, a tax reform package first allowed 529 plans to be used for private school expenses for K-12 education programs, initially limited to $10,000 annually for tuition only.
The One Big Beautiful Bill Act of 2025 significantly expanded these benefits:
- Increased Annual Limit: Starting January 1, 2026, families can withdraw up to $20,000 per year (up from $10,000) for K-12 expenses
- Expanded Eligible Expenses (effective July 5, 2025): Beyond tuition, families can now use 529 funds for curriculum materials, tutoring, standardized test fees, dual-enrollment programs, educational therapies for students with disabilities, and online educational platforms
These qualified expenses can be used for elementary, middle, and high school programs at public, private, or religious schools.
Transferring 529 Plan Funds to an ABLE Account
The same 2017 reforms allow funds transfers from a 529 plan to a qualified 529 ABLE Account, created by the 2014 Achieving a Better Life Experience (ABLE) Act. Americans with disabilities can save money for college and other expenses in a tax-deferred ABLE account to supplement private insurance and public benefits.
Update: The One Big Beautiful Bill Act of 2025 made this provision permanent. Previously set to expire on December 31, 2025, tax-free rollovers from 529 plans to ABLE accounts are now available indefinitely.
State-Level 529 Plan Changes
Each state manages its own 529 plan limits and potential tax deductions. Check out our state-level details page to stay updated on your state’s regulations, requirements, and taxes. You can also assess your state funds fees with our recent 529 fee study to learn more about fees and cost options for your state.
Maximize the Benefits of New 529 Rules and Roth IRA Rollover
So, how should you and your family take advantage of these recent changes? Here are some ways to benefit from the plan updates in 2024 and beyond. Work with a plan advisor, financial advisor, or tax professional in your state to maximize your financial and state tax benefits.
- Enroll in a 529 plan.
- Gift up to $19,000 annually to your child or grandchild, or more if you take advantage of superfunding.
- Pay directly to your grandchild’s institution tax-free and lower your taxable estate.
- Pay down student loans with your 529 plan funds.
- Use 529 plan funds for your child’s K-12 education or apprenticeship.
- Transfer unused 529 funds to a Roth IRA retirement plan.
- Use 529 funds for career credentialing and professional licensing programs.
