The newly enacted “Big Beautiful Bill” (H.R. 1, the 2025 budget reconciliation bill) significantly reshapes the landscape of education savings plans. With expansions for 529 plans, ABLE accounts, and the introduction of Trump accounts, families and financial planners must understand these important changes.
Changes to 529 Plans: Expanded Flexibility
Credentialing, Licensing, and Continuing Education Programs
Families can now use 529 plans for credentialing programs such as welding, aviation mechanics, and other trade certifications. Covered expenses include tuition, testing fees, and costs for books, equipment, and continuing education required to obtain or maintain a professional credential.
This includes not only initial program costs but also exam fees and continuing education required to obtain or maintain certification. For example, you can use 529 funds for:
- Preparation and exam fees for professional licenses and certifications, including CPA exam prep and fees, bar exam review and registration costs, and licensing exams for fields like law, accounting, and finance
- Training and certification for skilled trades and vocational careers, such as commercial Driver’s License (CDL) training, plumbing, electrical work, welding, HVAC, or cosmetology
These programs are often listed under state Workforce Innovation and Opportunity Act (WIOA) directories or the federal WEAMS (Web Enabled Approval Management System) database maintained by the U.S. Department of Veterans Affairs.
Credentialing programs must meet certain criteria to be considered qualified, typically recognized under the WIOA or similar federal/state programs. Be sure to check whether a specific program appears on your state’s WIOA list or the WEAMS database to confirm it qualifies for 529 usage.
This expands the scope of 529 savings to cover programs critical to skilled trades and high-demand technical careers, supporting individuals who choose alternative educational pathways.
When it applies: Distributions after July 4, 2025.
Broader K-12 Expenses
Previously limited to tuition, 529 plan funds can now cover an extensive range of additional K-12 costs. Families now have more flexibility to pay for:
- Curriculum materials (including textbooks, workbooks, and digital learning tools)
- Tutoring services (must meet certain requirements)
- Online education platforms or subscriptions
- Educational therapies for students with disabilities
- Standardized test fees (e.g., SAT, ACT, AP exams)
- Dual-enrollment tuition for college courses taken during high school
These changes reflect the growing diversity of educational models and the support services students often need to succeed.
When it applies: Distributions after July 4, 2025.
Higher Annual K-12 Limit
The annual per-child distribution cap for K-12 expenses has doubled from $10,000 to $20,000. This significant increase allows parents greater latitude in covering comprehensive education expenses for private, religious, or eligible public schools.
Families who prefer private or specialized education options will particularly benefit, as the expanded cap allows for a broader financial cushion to address tuition and the newly included academic and support-related expenses.
When it applies: Tax years starting in 2026.
ABLE Accounts: Stability and Increased Flexibility
Permanent ABLE-to-Work Contributions
The “ABLE-to-Work” initiative is now permanent, allowing working beneficiaries to contribute beyond standard limits. This means employed adults with disabilities have increased ongoing savings potential.
When it applies: Contributions after December 31, 2025.
Saver’s Credit Permanence
ABLE account contributions will remain eligible for the Saver’s Credit permanently, providing essential tax benefits for lower-income savers.
When it applies: Tax years after December 31, 2025.
Permanent 529-to-ABLE Rollovers
Tax-free rollovers from 529 plans to ABLE accounts, initially set to expire, are now permanently available. Families have enduring flexibility to adjust savings strategies for children with disabilities.
When it applies: Tax years after December 31, 2025.
Trump Accounts: A New Child Savings Option
What are Trump Accounts?
Trump accounts are essentially starter IRAs for children. While families can contribute up to $5,000 annually (indexed for inflation), additional contributions may come from employers, state programs, or nonprofit organizations, and certain types, like the federal seed deposit, don’t count toward the limit.
Key features:
- Federal Seed Contribution: Eligible children born between 2025 and 2028 receive a one-time $1,000 government deposit.
- Investment Restrictions: Funds must be invested in low-cost U.S. equity index funds until the beneficiary reaches 18.
- Withdrawal Rules: No withdrawals before the child turns 18, except rollovers to ABLE accounts. Post-18, normal traditional IRA withdrawal rules apply.
Limitations and Suitability:
Trump accounts aren’t ideal for short-term education savings the way that 529 plans are because withdrawals, even for education, incur ordinary income taxes on earnings and possibly a 10% early-withdrawal penalty. These accounts are better suited for long-term objectives, such as retirement or significant adult-life expenses.
When it applies: Accounts established from January 1, 2026, with contributions beginning July 4, 2026.
Final Thoughts
The Big Beautiful Bill enhances saving opportunities for education and lifelong financial security. Families should review their strategies and consider these changes carefully to maximize savings and tax benefits. As always, consulting with a financial advisor can help you navigate these important updates effectively.
