As a new college year begins, it's important to remember what expenses are covered by a 529 plan. Understanding this can help you make the most of your savings.
529 plans are designed to cover qualified education expenses. Knowing which expenses qualify can ensure you use the funds effectively.
Thanks to updates in the “One Big Beautiful Bill” (OBBB), 529 plans are now more flexible than ever. Below is a breakdown of what qualifies and what’s changed.
What You Can Pay For With a 529 Plan
1. Tuition and Fees Covers enrollment or attendance at eligible colleges, universities, and vocational schools.
2. Books, Supplies, and Equipment Includes textbooks, lab materials, and other course-required supplies.
3. Room and Board If the student is enrolled at least half-time, both on-campus and off-campus housing are eligible, up to the cost of on-campus housing.
4. Computer Technology Covers computers, internet access, printers, and other tech used during enrollment.
5. Special Needs Services Expenses required for students with special needs attending eligible institutions.
6. Apprenticeship Programs Includes costs for registered apprenticeship programs (fees, textbooks, tools, equipment).
7. Student Loan Repayments 529 plans can repay up to $10,000 in student loans for the beneficiary.
New OBBB Updates to 529 Plans
8. K-12 Tuition Increased K-12 Annual Limit Effective for tax years beginning after December 31, 2025, the annual limit for K-12 expenses paid from 529 accounts increases from $10,000 to $20,000 per beneficiary.
Expanded K-12 Qualified Expenses Effective for distributions after July 4, 2025, the OBBB expands eligible K-12 uses beyond tuition. Updated expenses include:
- Curriculum and curricular materials
- Books and instructional materials
- Online education tools
- Tuition for tutoring or educational classes outside the home
- Standardized test fees (SAT, ACT, AP exams)
- Dual enrollment program fees
- Educational therapies for students with disabilities
Tutoring Requirements: To be considered a qualified expense, tutoring or outside educational classes must meet the following criteria:
- The expense must be for “tuition for tutoring or educational classes outside of the home, including at a tutoring facility.”
- The tutor or instructor must not be related to the student.
- The tutor or instructor must meet at least one of the following qualifications:
- Be licensed as a teacher in any U.S. state,
- Have taught at an eligible educational institution (generally, an accredited post-secondary school eligible for Title IV federal aid), or
- Be a subject matter expert in the subject being taught.
9. Post-Secondary Credentialing Expenses Effective for distributions after July 4, 2025, 529 funds can now cover career-related credentialing costs:
- Tuition, books, fees, and supplies for programs offering:
- Industry-recognized credentials
- Registered apprenticeships
- Occupational/professional licenses
- Continuing education to maintain credentials
- Programs recognized under the Workforce Innovation and Opportunity Act or DoD COOL directory
Families can maximize their tax advantages by using a 529 plan for these expenses while covering essential educational costs.
If you have questions about this topic or how other tax strategies can help you save taxes book a FREE Tax Advisory Call Today.