529 College Savings Plans (529 plan), operated by a state or educational institution, off tax advantages and other incentives to make it easier to save for college and post-secondary training. 529 plans can also be used for tuition in connection with enrollment or attendance at an elementary or secondary public, private, or religious school for designated beneficiaries. Typically, 529 plans are set up by parents as a means to save for their children’s college expenses; however, they can also be set up by taxpayers for grandchildren.

The biggest advantages of 529 plans are that earnings are not subject to federal and, generally, state tax when used for the qualified education expenses of the designated beneficiary. Qualified education expenses include tuition and fees, books, and room and board. Beginning in 2026, newly enacted federal law broadens the scope for how funds can be used.

Below are the most significant 529 plan changes:

• Expanded Qualified Expenses: The definition of qualified expenses for K-12 has been expanded to include online learning materials and other curriculum materials, tutoring, extracurricular educational programs, standardized test fees, and educational therapies for students with disabilities. The annual limit for these expenses also increases to $20,000 per beneficiary, per year.
• Credentialing, Licensing, and Continued Education Expenses: H.R. 1 allows for 529 plans to be used for qualified post-secondary credentialing expenses, such as tuition and fees, books and supplies, required testing, equipment and continued education required to obtain and maintain professional credentials.
• Rollover to an Achieve a Better Life Experience (ABLE) Account: An ABLE account is a tax-advantaged savings account for individuals with disabilities. The rollover option from a 529 plan to an ABLE account was set to expire; however, H.B. 1 makes the provision permanent. This provides additional support to families should a 529 plan beneficiary become disabled, or if there are excess funds that could be better used in and ABLE account.
• Grandparent Owned 529 Plans and Financial Aid: Distributions from a grandparent-owned 529 plan will no longer be considered as untaxed student income for federal financial aid calculations. This enables grandparents to contribute to their grandchildren’s education without affecting need-based financial aid.

The IRS has a dedicated page on its website for 529 Plans Questions and Answers.

You should also consult your certified public accountant (CPA) or financial advisor on how a 529 plan can support your family’s educational needs and lower your tax liability.