Avoid Costly Mistakes: Maximize Your 529 Plan Benefits Today
By: Mac McSwain, CPA
As a new college year begins, it's important to remember what expenses are covered by a 529 plan. Understanding this can help you make the most of your savings.
529 plans are designed to cover qualified education expenses. Knowing which expenses qualify can ensure you use the funds effectively.
Thanks to updates in the “One Big Beautiful Bill” (OBBB), 529 plans are now more flexible than ever. Below is a breakdown of what qualifies and what's changed.
What You Can Pay For With a 529 Plan
Tuition and Fees. Covers enrollment or attendance at eligible colleges, universities, and vocational schools.
Books, Supplies, and Equipment. Includes textbooks, lab materials, and other course-required supplies.
Room and Board. If the student is enrolled at least half-time, both on-campus and off-campus housing are eligible, up to the cost of on-campus housing.
Computer Technology. Covers computers, internet access, printers, and other tech used during enrollment.
Special Needs Services. Expenses required for students with special needs attending eligible institutions.
Apprenticeship Programs. Includes costs for registered apprenticeship programs (fees, textbooks, tools, equipment).
Student Loan Repayments. 529 plans can repay up to $10,000 in student loans for the beneficiary — a lifetime limit, not an annual one.
New OBBB Updates to 529 Plans
8. K-12 Tuition
Increased K-12 Annual Limit. Effective for tax years beginning after December 31, 2025, the annual limit for K-12 expenses paid from 529 accounts increases from $10,000 to $20,000 per beneficiary.
Expanded K-12 Qualified Expenses. Effective for distributions after July 4, 2025, the OBBB expands eligible K-12 uses beyond tuition. Updated expenses include:
Curriculum and curricular materials
Books and instructional materials
Online education tools
Tuition for tutoring or educational classes outside the home
Standardized test fees (SAT, ACT, AP exams)
Dual enrollment program fees
Educational therapies for students with disabilities
Tutoring Requirements
To be considered a qualified expense, tutoring or outside educational classes must meet the following criteria:
The expense must be for “tuition for tutoring or educational classes outside of the home, including at a tutoring facility.”
The tutor or instructor must not be related to the student.
The tutor or instructor must meet at least one of the following qualifications:
Be licensed as a teacher in any U.S. state
Have taught at an eligible educational institution (generally, an accredited post-secondary school eligible for Title IV federal aid)
Be a subject matter expert in the subject being taught
9. Post-Secondary Credentialing Expenses
Effective for distributions after July 4, 2025, 529 funds can now cover career-related credentialing costs, including tuition, books, fees, and supplies for programs offering:
Industry-recognized credentials
Registered apprenticeships
Occupational/professional licenses
Continuing education to maintain credentials
Programs recognized under the Workforce Innovation and Opportunity Act or DoD COOL directory
A Note on State Taxes
These updates are federal changes. 529 plans are administered at the state level, and not every state has conformed to the expanded K-12 rules or the higher withdrawal limit. Some states may still treat newly added expenses — like tutoring or homeschool costs — as non-qualified for state tax purposes, even though they're tax-free federally. Before relying on the new categories, it's worth confirming how your state treats them.
Families can maximize their tax advantages by using a 529 plan for these expenses while covering essential educational costs.
529 planning is just one piece of a broader financial picture, and it's one we regularly help clients coordinate alongside tax strategy and wealth planning. If you'd like help making sure your education savings are working as hard as possible for your family, let's talk.