As a financial advisor, the typical question or concern I hear from parents is, “Am I saving too much in my child’s 529 plan, or not enough?” It’s a fair question, especially as college costs shift and different career paths are chosen. Well, Congress is now considering changes that could make 529 plans more flexible than ever. The One Big Beautiful Bill Act (H.R. 1), which recently passed the House and is now in the Senate’s hands, could expand how families use these accounts. The expansion would cover not just college tuition, but everything from homeschooling supplies to trade school credentials.
Expanded Qualified Expenses
Beyond the existing allowance (up to $10,000 annually for K–12 tuition), the bill would let families withdraw tax-free for a broader swath of K–12 and homeschooling costs, such as:
- Curriculum materials, books, instructional supplies
- Online learning platforms
- Tutoring or classes outside the home
- Dual-enrollment fees and standardized test expenses
- Educational therapies for students with disabilities
A Wall Street Journal analysis highlights:
“The proposed provisions…would expand tax-free withdrawals from 529 plans to include costs far beyond K-12 tuition,” including test prep and credentials..”
Workforce Credentials
The bill broadens eligibility to include nondegree postsecondary credentialing. For instance, HVAC, welding, EMT training, cybersecurity, or professional licenses, so long as the programs are recognized.
This reflects a broader strategic push toward career-focused education, not just traditional college pathways.
Homeschool and K–12 Support
Homeschooling families would gain access to 529 funds for home-based education, covering supplies, testing, and services previously ineligible because the IRS didn't consider homeschooling a “school”. Given rising homeschooling costs (estimated $1,300–$1,600 per child), this is a significant boost .
State-by-State Considerations Maintained
- Contribution rules and state caps remain unchanged federally, a win for consistency.
- However, state tax treatment may lag. Some states currently penalize K–12 withdrawals, so federal expansion may require legislative updates at the state level.
What Stays the Same
- Lifetime contribution limits and federal tax benefits of tax-free growth and withdrawals for qualified expenses remain untouched.
- The current $10,000 annual limit for K–12 tuition remains in place, but added flexibility comes in various new expense categories.
Final Take
If passed, the One Big Beautiful Bill would dramatically broaden 529 plan utility, breaking down barriers between “college-only” savings and real-world educational flexibility, from preschool to professional certification. It reflects a modernized approach that recognizes diverse paths to success.
That said, timing and details matter: the Senate version may tweak the changes, and some provisions may not be uniform across state tax codes. For families eager to leverage this change, now’s the time to review your 529 allocations, track legislative updates, and prepare for potentially new qualified education options.
If you have questions, or would like to discuss your college savings options, please reach out for a complimentary consultation.
Sources:
- Ascensus on expanded 529 and ABLE provisions nasfaa.org+15ascensus.com+15arbcpa.com+15
- Kiplinger’s deep dive and timeline nasfaa.org+5kiplinger.com+5kiplinger.com+5
- SavingForCollege on workforce credentials en.wikipedia.org+3savingforcollege.com+3savingforcollege.com+3
- WSJ & New York Times on bill context and expansions Tax Breaks for 529 College-Savings Plans Expand in GOP Tax Bill - WSJ
Disclosures:
A 529 plan is a college savings plan that allows individuals to save for college on a tax-advantaged basis. Every state offers at least one 529 plan. Before buying a 529 plan, you should inquire about the particular plan and its fees and expenses. You should also consider that certain states offer tax benefits and fee savings to in-state residents. Whether a state tax deduction and/or application fee savings are available depends on your state of residence. For tax advice, consult your tax professional. Non-qualifying distribution earnings are taxable and subject to a 10% tax penalty.