If you've been saving for your kid's education in a 529 plan — or even just thinking about it — you picked a great time to pay attention. A wave of new rules that took effect in late 2025 and early 2026 has made 529 plans significantly more flexible than the version your parents might remember.
The changes are big enough that people who previously dismissed 529s as "too restrictive" or "what if my kid doesn't go to college?" may want to take a second look. Let me walk you through what's actually different and how to use these new rules to your advantage.
A Quick Refresher: What Is a 529 Plan?
A 529 plan is a tax-advantaged savings account designed for education expenses. You contribute after-tax dollars, the money grows tax-free, and withdrawals are also tax-free as long as you use them for qualified education expenses. Most states also offer a state income tax deduction or credit for contributions, which is essentially a bonus on top.
Think of it as a Roth IRA, but for education instead of retirement. And as of 2026, the definition of "education" just got a whole lot broader.
The Biggest Change: K-12 Expenses Just Doubled (and Expanded)
Before 2026, you could withdraw up to $10,000 per year from a 529 to pay for K-12 tuition at private or religious schools. That was it — tuition only, $10,000 cap.
Starting January 1, 2026, that annual limit jumped to $20,000 per student. But the dollar amount isn't even the most exciting part. The One Big Beautiful Bill Act (signed into law on July 4, 2025) dramatically expanded what counts as a qualified K-12 expense. According to the legislation, you can now use 529 funds for:
- Curriculum and instructional materials — textbooks, workbooks, and online educational platforms
- Tutoring — as long as the tutor isn't a relative and meets qualification standards
- Standardized test fees — SAT, ACT, AP exams, and college admission tests
- Dual-enrollment programs — high school students taking college courses
- Educational therapies — occupational, behavioral, physical, and speech-language therapies for students with disabilities, provided by a licensed practitioner
- Homeschool expenses — curriculum materials for families who homeschool
This is a massive shift. If you're a parent paying $200 a month for tutoring, or shelling out hundreds in AP exam fees, or covering therapeutic services for a child with ADHD or a learning difference, those costs can now come from tax-free 529 dollars. For a family in the 24% federal tax bracket, that's real savings — roughly $24 saved in taxes for every $100 in qualified expenses.
The Roth IRA Rollover: Your "What If They Don't Go to College?" Safety Net
One of the biggest objections to 529 plans has always been: "What if my kid gets a scholarship? What if they skip college entirely? Am I stuck with this money?"
The SECURE 2.0 Act introduced an answer, and it's now fully in effect: you can roll unused 529 funds into a Roth IRA for the beneficiary. According to Fidelity and the IRS, here are the rules:
- Lifetime cap of $35,000 per beneficiary
- Annual rollovers can't exceed the Roth IRA contribution limit ($7,500 in 2026, or $8,600 if the beneficiary is 50+)
- The 529 account must have been open for at least 15 years
- Contributions made in the last 5 years (and their earnings) aren't eligible for rollover
- The beneficiary must have earned income equal to or greater than the rollover amount
Let me put that in real terms. Say you opened a 529 when your daughter was born, contributed steadily, and she ends up getting a full scholarship at 18. The account has been open for 18 years (clears the 15-year hurdle), and she's now working a part-time job earning at least $7,500 a year. You can start rolling $7,500 per year from her 529 into a Roth IRA in her name — tax-free and penalty-free — until you hit the $35,000 lifetime cap.
That's a heck of a head start on retirement savings for a young adult. At a 7% average annual return, $35,000 invested in a Roth IRA at age 22 could grow to roughly $525,000 by age 62 — all tax-free.
Career Credential Programs: 529s Aren't Just for College Anymore
Here's another change that doesn't get enough attention: 529 funds can now be used for nondegree career training and credential programs. We're talking trade certifications, coding bootcamps, and vocational training that leads to a recognized postsecondary credential.
This matters because according to the Bureau of Labor Statistics, many of the fastest-growing occupations — from wind turbine technicians to medical assistants — require certifications or associate degrees rather than four-year bachelor's degrees. The 529 plan finally reflects that reality.
If your child wants to become an electrician, a dental hygienist, or a cybersecurity analyst through a certificate program, 529 money can help pay for it.
ABLE Account Rollovers Are Now Permanent
For families with a member who has a disability, there's another quiet but important update. The ability to roll 529 funds into an ABLE (Achieving a Better Life Experience) account — a tax-advantaged savings account for individuals with disabilities — was originally set to expire at the end of 2025. The OBBBA made this option permanent.
ABLE accounts allow individuals with disabilities to save up to $100,000 without affecting eligibility for federal benefits like SSI and Medicaid. If you've been saving in a 529 and your beneficiary qualifies for an ABLE account, this provides a meaningful, lasting financial pathway.
The State Tax Trap: Don't Skip This Part
Here's where I need to pump the brakes a little, because this is the part that trips people up.
All of the expanded uses I just described are federally tax-free. But your state may not agree. According to Savingforcollege.com, many states have not yet conformed to the federal changes introduced by the OBBBA. That means a withdrawal that's perfectly fine with the IRS could still trigger state income tax, or even a clawback of the state tax deduction you claimed when you contributed.
Before you start tapping your 529 for tutoring or AP exam fees, check whether your state recognizes these expanded expenses. A quick call to your plan administrator or a look at your state's 529 website should give you the answer. When in doubt, a tax professional can help you avoid an unpleasant surprise at filing time.
Who Should Open a 529 Now?
With all these changes, the case for a 529 is stronger than it's been in years. Here's who should seriously consider one:
New Parents or Expecting Parents
The earlier you start, the more time compound growth has to work. Even $50 a month from birth adds up significantly over 18 years. And with the Roth IRA rollover option, the "what if they don't go to college" risk is largely neutralized.
Parents of K-12 Students
If you're already paying for private school tuition, tutoring, or educational therapies, a 529 can turn those expenses into tax-free withdrawals. The $20,000 annual K-12 limit makes this especially useful for families with significant education costs.
Grandparents
Grandparents can open and contribute to 529 plans for grandchildren. Thanks to a recent FAFSA change, grandparent-owned 529 distributions no longer count as untaxed income on the student's financial aid application — removing what used to be a major drawback.
Adults Considering Career Changes
Going back for a credential program or vocational training? You (or a family member) can use 529 funds for qualified nondegree programs. It's not just a tool for kids anymore.
The Bottom Line
The 529 plan in 2026 is a dramatically different product than it was even two years ago. You can use it for K-12 tutoring and test fees, trade school, educational therapy, and — if there's money left over — roll it into a Roth IRA for your child's retirement. The flexibility concerns that kept many families on the sidelines have been largely addressed.
If you don't have a 529 yet, this is a strong time to open one. If you already do, take a few minutes to review the new qualified expenses and make sure you're taking full advantage. Just remember to check your state's rules before assuming everything is tax-free at every level.
Your future self — and your kid's future self — will thank you.
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