College Corner | The 529 Just Got More Flexible

If you considered a 529 a few years ago but didn’t open one, you might want to take another look. 

The One Big Beautiful Bill Act (OBBBA) rewrote the definition of what a 529 can pay for. The OBBBA expanded 529-qualified expenses in two meaningful ways: it broadened what counts as an eligible K–12 expense, and it opened the door to postsecondary credentials beyond a traditional four-year degree.¹

How a 529 Works

A 529 plan is a tax-advantaged education savings plan. Before choosing a plan, it's important to consider not only the state tax treatment but also any associated fees and expenses. Availability of a state tax deduction will depend on your state of residence, as state tax laws and treatment may vary from federal tax laws. If you make nonqualified distributions, earnings will be subject to income tax and a 10 percent federal penalty tax.

What a 529 Can Pay For 

Before the OBBBA, K–12 529 withdrawals were capped at $10,000 per year per beneficiary. Beginning in 2026, that cap doubles to $20,000, and the list of eligible expenses now includes:¹

• Tutoring, if provided outside the home by a tutor who is unrelated to the student and meets qualification requirements (licensed educator, subject matter expert, or instructor at an eligible institution)
• Curriculum materials, textbooks, instructional materials, and online education resources
• Standardized test fees, including AP exams and college admission exams
• Dual enrollment fees for postsecondary courses taken while still in high school
• Educational therapy for students with disabilities, including occupational, behavioral, physical, and speech-language therapies

Not Going to College?

Starting July 5, 2025, families can use 529 savings for a wide range of programs, including:¹

• Vocational and trade programs: CDL training, HVAC, plumbing, electrical, cosmetology, welding, aviation mechanics
• Professional licensing exams: CPA exam prep and fees, bar exam review and registration, and licensing in law, accounting, and finance
• Apprenticeship programs registered with the Department of Labor
• Industry certifications and continuing education are required to maintain a professional credential

What If My Child Doesn’t Use It?

Contributions can be transferred from a 529 plan directly into a Roth IRA opened in the beneficiary’s name. There are requirements:²

• The 529 account must have been maintained for at least 15 years
• Contributions transferred must have been in the account for at least 5 years
• Annual transfers are subject to the Roth IRA contribution limits for the year

To qualify for tax- and penalty-free withdrawals of earnings, Roth IRA distributions must meet a 5-year holding period and occur after age 59½. Tax-free and penalty-free withdrawals can also be taken under certain other circumstances, such as the owner's death. The original Roth IRA owner is not required to take minimum annual withdrawals.

Quick Note on Trump Accounts

You may have heard about the new “Trump Accounts” introduced under the OBBBA. It’s a federally seeded savings vehicle, but it’s designed for long-term wealth building, not education. A 529 and Trump Accounts are built for different goals. If the question is, “Do I need both?" the short answer is: they don’t replace each other. A 529 is the right tool for education costs. Trump Accounts are intended for the future more broadly.

Worth a Second Look?

The 529 is more versatile today than it was two years ago. If you haven’t checked out the new features, you might want to see if the account now better aligns with your overall strategy.

<sup>1. SavingForCollege.com, January 1, 2026
2. Fidelity.com, May 5, 2026</sup>