Are You Missing Out on the New Ways to Use 529 Plan Funds?
New Tax Changes Expand 529 Plan Benefits for Families
The recently passed One Big, Beautiful Bill Act (OBBBA) is making big waves for education savings. Starting in 2025, 529 plans will offer more flexibility than ever, helping families save not just for college, but also for K–12 tuition, career training, and other education goals. These updates mean families can now use 529 plan funds not just for traditional college costs, but also for workforce development programs, apprenticeships, licensing, and other career-focused opportunities. The changes aim to help parents, students, and professionals get the most from their tax-advantaged education savings plans, whether the goal is a four-year degree, trade certification, or specialized training.
A Quick Refresher: What is a 529 Plan?
A 529 plan is a tax-advantaged savings account designed to help families invest for future education expenses. Contributions grow tax-deferred, and withdrawals are tax-free when used for qualified expenses. While originally focused on higher education, recent changes have significantly expanded eligible uses.
New Opportunities for K-12 Education
Since 2017, families in many states have been able to use up to $10,000 per year from their 529 plans for private school tuition. Beginning in January, that annual limit will double to $20,000, in participating states.
In addition to tuition, qualified K-12 expenses will now include:
- Curriculum and instructional materials
- Private tutoring
- Fees for Advanced Placement (AP) or college-admissions tests
- Educational therapies for students with disabilities
Tip: If you plan to use your 529 funds sooner for K-12 expenses, consider a more conservative investment allocation, as the money will have less time to grow.
Expanding Career & Workforce Training Options
529 plans can now be used for a broader range of postsecondary and career-focused programs, including:
- State-approved workforce development programs
- Federally approved apprenticeships
- Licensing or certification programs (e.g., electricians, mechanics, IT credentials)
- Graduate school admissions test prep, continuing education courses, and learning materials
This change reflects the growing demand for skilled workers in high-demand trades and professional fields that don’t require a traditional four-year degree.
Why These 529 Changes Matter
For years, some families hesitated to open a 529 plan because they feared losing the tax benefits if a child chose not to attend college. As Martha Kortiak Mert, COO of Saving for College, points out, “The more flexible [529 plans] become, the more likely parents are to open them and not be worried about whether they will use the funds or not.”
By broadening the list of eligible expenses, the 2025 529 plan changes make these accounts more versatile than ever. Whether your family’s goal is to cover private school tuition, pay for trade school, or prepare for graduate education, your 529 can now adapt to those needs.
Key Takeaways for Education Planning
529 plans still offer tax-free growth and tax-free withdrawals for qualified expenses.
States may offer additional incentives—check your state’s plan for details.
The new rules could help more families save confidently, knowing their funds can be used across multiple education paths.
Early withdrawals for K–12 expenses require careful investment planning to protect your savings.
Bottom line: If you already have a 529 plan or are considering opening one, this is a great time to revisit your strategy. We can help you understand how these new rules apply in your state, optimize your investment allocation, and integrate your education savings into your overall financial plan.
Contact us at info@deschutesinvestment.com to schedule a consultation with one of our advisors.
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