Major Updates to 529 Plans in 2025: What Parents and Students Should Know

As another school year approaches, my boys, ages 5 and 6, await their turns in Kindergarten and first grade. Given school is the one constant in their lives, I often find myself thinking about their 529 plans and the opportunities their futures may hold. Since they’re still so young, much is uncertain, but I’m determined to ensure that financial barriers don’t hold them back. When I began my own college journey, I didn’t have education savings set aside, so I’ve made it a personal goal to provide that support for my children. In July 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) which introduced major updates to education savings plans—changes not only our team believes are impactful for every parent to understand, but also for me personally.

To begin, a 529 college savings plan is a state-sponsored, tax-advantaged investment account designed to help families save for education-related expenses. While contributions aren’t tax-deductible at the federal level, the account’s growth and withdrawals are tax-free when used for qualified education expenses.

In 2025, contribution limits align with the annual gift tax exclusion—up to $19,000 per individual, per beneficiary. There’s also the option to “superfund” a 529, which allows you to front-load five years’ worth of contributions at once—$95,000 per individual, or $190,000 for a couple, per beneficiary.

One concern that many parents, including myself, often have is: What if my child doesn’t need the money? What if they earn a scholarship, choose not to attend college, or pursue a trade instead? While the funds remain theirs, any earnings withdrawn for non-qualified expenses would be subject to income tax and penalties.

Fortunately, there are ways to avoid those taxes and penalties. One option is to change the beneficiary, for instance, to a sibling or even a future child—so the funds can still be used for qualified education expenses. Another option, introduced with recent legislation, allows for a lifetime rollover of up to $35,000 from a 529 plan to a Roth IRA, assuming certain requirements are met.

Thanks to the One Big Beautiful Bill Act signed in July 2025, concerns over limited uses for 529 funds may be easing. The definition of “qualified education expenses” has expanded, offering families greater flexibility and peace of mind.

The following changes to qualified expenses were made at the federal level, so it’s important to check whether your state has adopted the same changes.

Qualified K–12 Expenses Under the New Legislation

The recent federal updates expand the list of qualified K–12 education expenses that can be paid using 529 plan funds. These now include:

Tuition for public, private, or religious elementary and secondary schools.
Curriculum and curricular materials.
Books and other instructional materials.
Online educational programs and resources.
Tutoring or educational classes outside the home, including at tutoring centers. Tutors must meet one of the following criteria and cannot be related to the student:
- Be a licensed teacher,
- Be a current or former teacher at an eligible educational institution, or
- Be a subject matter expert in the relevant subject area.
Standardized test fees, including those for nationally recognized achievement tests, Advanced Placement (AP) exams, and college entrance exams such as the SAT or ACT.
Dual enrollment fees for courses taken through an institution of higher education.
Educational therapies for students with disabilities, including occupational, behavioral, physical, and speech-language therapy, when provided by a licensed or accredited practitioner.

Important Note: Beginning January 1, 2026, the total annual limit for K–12 qualified expenses covered by 529 plans will increase from $10,000 to $20,000 per beneficiary.

Expanded 529 Eligibility for Postsecondary Credentials

The recent expansion of 529 plan benefits now includes a wide range of postsecondary credentials, making it easier to support career-focused education outside of traditional college paths. Qualified expenses now cover:

Skilled trades and vocational programs such as CDL training, HVAC certification, welding, plumbing, electrical work, cosmetology, and more.
Professional licensing and certification fees, including costs related to CPA exam preparation and testing, bar exam registration and review, and other licensure exams in fields like law, accounting, and finance.
Required continuing education (CE) courses necessary to maintain professional credentials for careers such as nursing, social work, teaching, real estate, and financial advising.
Books, supplies, and equipment needed as part of a qualifying credentialing or licensing program.

This expansion recognizes and supports the growing demand for non-college career paths by allowing tax-free 529 withdrawals for the training and certification expenses these careers require.

529-to-ABLE Account Rollovers: Now Permanent

Previously, a provision allowed 529 account holders to roll over funds to an ABLE account for the beneficiary or a qualifying family member, but this option was scheduled to expire on December 31, 2025. Under the new legislation, that expiration date has been eliminated, making rollovers from 529 plans to ABLE accounts a permanent option beyond 2025.

These recent updates to 529 plans have only strengthened my confidence in the decision to establish and fund this type of account for my children. No matter where their career paths lead, I know the savings will offer meaningful support. And if my boys aren’t the ultimate beneficiary of the funds, there’s the exciting possibility that the money could benefit my future grandchildren. It’s empowering to have a flexible tool like this in place to support their long-term success.