529 plans have long been a cornerstone of education savings, offering tax-free growth when funds are used for qualified educational expenses. Recent legislation under the OBBBA has dramatically expanded their flexibility, making them more valuable for families, professionals, and anyone focused on tax-centric planning. Here’s what you need to know about the new rules and how they can impact your financial planning and retirement planning.
What Changed for 529 Plans Under the OBBBA?
Before the OBBBA, 529 plans could be used for college expenses without an annual limit and up to $10,000 per year for K–12 tuition at public, private, or religious schools. The new law doubled the annual limit to $20,000 and broadened the definition of “qualified” expenses.
Expanded Qualified Expenses for 529 Plans
Starting in 2026, 529 funds can now cover:
- Books and instructional materials
- Online learning tools
- Tutoring services
- Standardized testing fees (SAT, ACT, AP exams)
- Educational therapies
This expansion benefits families who homeschool, parents funding private education, and those supporting children with specialized educational needs. It also creates opportunities for tax-efficient strategies for education planning.
Benefits for Licensed Professionals
529 plans are no longer just for traditional schooling. Licensed professionals can now use these funds for:
- Continuing education courses
- Licensing exams
- Credential maintenance
This change makes 529 plans a versatile tool for career development and lifelong learning.
Roth IRA Rollover Option for 529 Plans
One of the most exciting updates is the ability to roll over up to $35,000 from a 529 plan into a Roth IRA, provided the account has been open for at least 15 years. This feature, introduced in 2024, helps parents and grandparents avoid concerns about overfunding and gives beneficiaries a head start on retirement planning.
State Compliance Matters
Not all states have adopted these changes. Before funding a 529 plan, consult a tax advisor or a fee-only fiduciary to ensure compliance and optimize your strategy. At Pathview Wealth Advisors, our family-focused team rooted in San Diego specializes in tax planning, financial planning, and wealth management to help you make informed decisions.
Why This Matters for Your Family
These updates make 529 plans a cornerstone of tax-centric planning for education and retirement. Whether you’re a parent, grandparent, or professional, this is an opportunity to align your financial goals with tax-efficient strategies.
Ready To Make A Change?
Make the most of these new 529 plan benefits. Our family-focused team at Pathview Wealth Advisors, can help you create a tax-efficient planning strategy that aligns with your education and retirement goals.
Schedule a consultation today. Let’s build a plan that works for your family’s future.
This content is for educational purposes only and is not investment, tax, or legal advice. Investing involves risk, including possible loss of principal. Consult your own financial or tax professional before making decisions.
A 529 plan is a tax-advantaged education savings account. Your contributions grow tax-deferred, and withdrawals are tax-free when used for qualified education expenses such as tuition, books, and other approved costs.
The One Big Beautiful Bill Act (OBBBA) expanded how you can use 529 funds. It increased the K–12 annual withdrawal limit to $20,000 per student and broadened the list of qualified expenses beyond tuition.
Starting in 2026, 529 plans can now cover:
– Books and instructional materials
– Online learning tools and platforms
– Tutoring services
– Standardized test fees (SAT, ACT, AP exams)
– Educational therapies
These expenses now qualify for tax-free withdrawals at the federal level.
Yes. In 2026, you can withdraw up to $20,000 per year per student for K–12 education expenses. This limit applies across all 529 accounts for that beneficiary.
No. The $20,000 annual limit applies per student, not per account. Taking more than that across multiple accounts can trigger taxes and penalties.
Yes. Recent law changes allow 529 funds to cover many homeschool costs, including curriculum, tutoring, online materials, testing fees, and educational therapies, subject to the annual limit.
Yes. 529 plans can now fund:
– Continuing education courses
– Licensing exams (CPA, bar exam, etc.)
– Credentialing programs
– Required CE credits to maintain a license
This expansion makes 529 plans useful for lifelong learning and career advancement.
Yes. Eligible uses now include vocational training, trade programs, and recognized credentialing programs, along with related costs like tuition, books, and exam fees.
Yes. You can roll over up to $35,000 per beneficiary from a 529 plan into a Roth IRA, tax-free and penalty-free, if certain conditions are met.
To roll funds into a Roth IRA:
– The 529 account must have been open for at least 15 years
– The beneficiary must have earned income
– Annual rollovers cannot exceed Roth IRA contribution limits
– Contributions from the last 5 years are not eligible
These rules ensure the rollover aligns with standard retirement contribution guidelines.
Non-qualified withdrawals are subject to ordinary income tax on earnings plus a 10% federal penalty, unless an exception applies (such as scholarships or disability).
No. Some states have not yet conformed to the federal changes. A withdrawal that is tax-free federally could still be taxable at the state level.
529 plans now support both education and long-term wealth strategies. With expanded qualified expenses and Roth IRA rollover options, they offer more flexibility for tax-efficient planning across multiple life stages.
Yes. The expanded flexibility reduces the risk of overfunding and increases the ways you can use the funds tax-free. This makes 529 plans a stronger tool for both education savings and broader tax planning.