At a Glance
529 plans offer a tax-advantaged way to save for education expenses. Recent changes expand the types of expenses that may qualify for tax-free 529 plan distributions, including certain K–12 expenses and credentialing costs.
Beginning in 2026, the annual distribution limit for qualified K–12 expenses increases from $10,000 to $20,000 per beneficiary. Unused 529 plan funds may also be eligible for a Roth IRA rollover, subject to applicable limits.
Key Takeaways
- Beginning in 2026, the annual 529 plan distribution limit for qualified K–12 expenses increases from $10,000 to $20,000 per beneficiary.
- Qualified K–12 expenses may include tuition, textbooks, tutoring services, online learning tools, and software.
- Credentialing expenses paid after July 4, 2025, may qualify for tax-free 529 plan distributions.
- Qualified credentialing expenses may include testing and education costs to obtain or maintain certain postsecondary credentials, such as CPA, RN, or JD credentials.
- Unused 529 plan funds may be eligible for a Roth IRA rollover, subject to a $35,000 lifetime limit and annual Roth IRA contribution limits.
Who Is Affected
These changes may affect:
- Individuals saving for a child’s or family member’s education
- Parents and grandparents who own or contribute to 529 plans
- Students attending K–12 schools
- Individuals pursuing or maintaining postsecondary credentials
- 529 plan beneficiaries with unused account balances
There are no income or age restrictions to establish a 529 plan.
Eligibility and Key Requirements
Eligibility Requirements
To receive tax-free treatment, 529 plan distributions must be used for qualified education expenses.
Historically, qualified higher education expenses have included:
- Tuition
- Fees
- Books
- Supplies
- Equipment required for enrollment or attendance at an eligible educational institution
Qualified expenses have also been expanded to include K–12 tuition and student loan repayments, subject to a $10,000 lifetime limit for student loan repayments.
Expanded Qualified Expenses
Qualified tax-free expenses for K–12 education may include:
- Tuition
- Textbooks
- Tutoring services
- Online learning tools
- Software
Beginning with credentialing expenses paid after July 4, 2025, qualifying expenses may also include fees for testing and education required to obtain or maintain a postsecondary credential. Examples may include credentials such as CPA, RN, and JD.
Limits, Thresholds, and Phaseouts
Beginning in 2026, the annual per-beneficiary distribution limit for qualified K–12 expenses increases from $10,000 to $20,000.
Student loan repayments remain subject to a $10,000 lifetime limit.
The Roth IRA rollover opportunity for unused 529 plan funds is subject to:
- A $35,000 lifetime rollover limit
- Annual Roth IRA contribution limits
Exclusions and Special Rules
Distributions must be used for qualified education expenses to receive tax-free treatment.
While the increased K–12 distribution limit may reduce the likelihood of unused funds, intentionally overfunding a 529 plan may not be ideal. The Roth IRA rollover provision may provide an option for transferring unused funds while preserving the tax advantages associated with growth in the account.
Documentation and Reporting
The article does not identify specific reporting requirements. Account owners and beneficiaries should retain records supporting:
- Contributions to the 529 plan
- Distributions from the plan
- The date and amount of each qualifying expense
- Tuition, books, supplies, equipment, tutoring, software, and online learning expenses
- Credentialing-related testing and education expenses
- Student loan repayments
- Any Roth IRA rollover of unused 529 plan funds
Effective Dates
- After July 4, 2025: Credentialing expenses paid after this date may qualify as tax-free 529 plan expenses.
- Beginning in 2026: The annual distribution limit for qualified K–12 expenses increases from $10,000 to $20,000 per beneficiary.
- No expiration date is identified in the article for these expanded 529 plan provisions.
Planning Considerations
Families should review anticipated education expenses to determine whether 529 plan distributions can be used for qualified K–12, higher education, or credentialing costs.
Individuals pursuing professional credentials should consider whether upcoming testing and education costs may qualify for tax-free 529 plan distributions. This may be particularly relevant for individuals working toward or maintaining credentials such as CPA, RN, or JD.
Account owners should also consider the annual $20,000 per-beneficiary limit for qualified K–12 distributions beginning in 2026 when planning distributions.
For accounts with unused balances, taxpayers may want to evaluate whether a Roth IRA rollover could provide flexibility. The rollover is subject to the $35,000 lifetime limit and annual Roth IRA contribution limits.
Example
A 529 plan beneficiary incurs expenses in 2026 for K–12 textbooks, tutoring services, and online learning software. If the expenses qualify, the beneficiary may use 529 plan distributions to pay for those costs, subject to the $20,000 annual per-beneficiary distribution limit for qualified K–12 expenses.
In a separate situation, an individual uses 529 plan funds to pay qualifying testing and education expenses after July 4, 2025, to obtain or maintain a professional credential. Those credentialing expenses may qualify for tax-free treatment.
Next Steps
- Review anticipated K–12, higher education, and credentialing expenses for potential 529 plan use.
- Confirm that planned distributions will be used for qualified expenses.
- Track K–12 distributions against the $20,000 annual per-beneficiary limit beginning in 2026.
- Evaluate whether unused 529 plan funds may be eligible for a Roth IRA rollover.
For additional information about 529 plan distributions, expanded qualified expenses, and planning opportunities, contact your RKL advisor.
Frequently Asked Questions
Who can establish a 529 plan?
There are no income or age restrictions to establish a 529 plan.
What expenses can be paid with tax-free 529 plan distributions?
Qualified expenses may include tuition, fees, books, supplies, equipment, certain K–12 expenses, student loan repayments subject to the applicable lifetime limit, and certain credentialing expenses.
What is the annual K–12 distribution limit?
Beginning in 2026, the annual distribution limit for qualified K–12 expenses is $20,000 per beneficiary.
When do credentialing expenses qualify?
Credentialing expenses paid after July 4, 2025, may qualify. These may include fees for testing and education required to obtain or maintain a postsecondary credential.
Can unused 529 plan funds be rolled into a Roth IRA?
Potentially. Unused 529 plan funds may be eligible for a Roth IRA rollover, subject to a $35,000 lifetime limit and annual Roth IRA contribution limits.
