529 529s move further beyond college

With the passage this summer of the One Big Beautiful Bill Act (OBBBA), 529 college savings accounts gained even more flexibility and moved further beyond their original role of helping families save for a traditional college education. The result is that 529s now have a much broader use — not only for a growing variety of non-college educational and occupational training expenses but also as a tax-advantaged planning tool. 

Two of the biggest changes to 529 rules from OBBBA are allowing broader use of 529 plan savings to pay for professional credentialling expenses and the doubling of the amount of 529 savings that can be used annually for K-12 educational expenses, from $10,000 to $20,000.*

“There’s now a lot more flexibility built into  529 accounts, which makes them more adaptable to a variety of career paths, notably careers that don’t require a college degree. This is especially important as the cost of college continues to rise,” says Rob Forshee, product manager at Capital Group. “They’ve really moved beyond being just a college savings vehicle into being a broad educational savings tool.”

Tax-advantaged treatment applies to 529 accounts used for qualified education expenses. It’s important to note that while these are federal changes to the rules of 529 plans, individual states may have different tax treatment for qualified education expenses including the expanded qualified expenses, so state-specific rules should also be consulted. If withdrawals are used for purposes other than qualified education expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax.

From big rig drivers to HVAC technicians: 529s can now help

To the extent some parents are hesitant to open 529s for a child who might not ultimately attend college, the new changes may alleviate some of that concern. In a change that took effect in July 2025, withdrawals from 529 accounts can now be used to pay for recognized postsecondary credentialing programs, whether the underlying career requires a college education or not. Among the many specialties that can now benefit from 529 funding: truck driving, dental hygienist, aviation maintenance, heating, ventilation and air conditioning (HVAC) service. These can be career paths after college or career paths after high school. 

Regarding these credentialling expenses, the new rules allow 529 savings to be used for coverage of tuition, fees, books, supplies, equipment, and testing fees and include coverage for recertification.

“The expanded flexibility of 529s is a positive development,” adds Polina Tsybrovska, a multi-asset investment specialist at Capital Group. “We believe the changes made this summer will help overcome objections from those who previously hesitated to use 529s due to perceived limitations around eligible expenses.”

Up to $20,000 per year for K-12 expenses

The other significant change relates to how 529s can be used to fund K-12 education, which is particularly relevant for families who send their children to private schools. The annual limit for these expenses is doubled, to $20,000, effective in 2026. In addition, 529 plan funds can now be used for expenses beyond tuition, including tutoring, standardized tests and educational therapies for students with disabilities. 

529 rollover to Roth IRAs

The changes in OBBBA did not impact the ability to roll leftover 529 funds into a Roth IRA for the beneficiary of the 529, but it is worth revisiting in light of the new, broader role of 529 accounts. This change was enacted in late 2022 as part of the Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0.

Leftover funds in a 529 account can be rolled into a Roth IRA, with certain limitations, as spelled out below. With this provision intact and the new categories of eligible expenses, the risk that 529 assets will be “stranded” is smaller than ever. 

Importantly, limitations to this roll-over provision include:

• The 529 account must be at least 15 years old
• The amount to be rolled over must have been in the account for at least 5 years 
• The Roth IRA must be in the name of the 529 plan beneficiary 
• Rollover contributions must be within Roth IRA annual contribution limits and is reduced by any “regular” traditional or Roth IRA contributions made by the beneficiary in that year 
• Rollovers are limited to a maximum of $35,000 per beneficiary over their lifetime  

Changes to ABLE accounts

The OBBBA also made changes in the Achieving a Better Life Experience Act (ABLE), which allows eligible individuals with disabilities to open tax-advantaged savings accounts similar to 529s. Several provisions related to ABLE accounts that were set to expire have been made permanent, including tax-free rollovers from 529 plans to ABLE accounts, enhanced contribution limits for working ABLE beneficiaries and the ability of ABLE contributions to receive Savers Credit. Tax-advantaged treatment applies to savings used for qualified disability expenses. State tax treatment varies.

Overall, the changes enacted this summer give families greater flexibility to use their 529 savings — whether for K-12 education, college costs or other career-related expenses that don’t necessarily involve traditional educational institutions.