The 529 Account Is Not Just for College Anymore
For years, 529 plans were primarily seen as a tool for saving for college tuition. However, recent legislative changes, including the SECURE Act 2.0 and the One Big Beautiful Bill Act (OBBBA), have transformed 529 accounts into one of the most flexible and powerful education and planning tools available today. This evolution has led many families to consider these accounts earlier and more strategically.
What You Can Use a 529 Account For Today
1. Traditional College Expenses
The primary purpose of a 529 plan remains funding college education, covering qualified expenses like tuition and mandatory fees, room and board for eligible students, and educational supplies such as books, computers, and internet access. When used for qualified education expenses, withdrawals from the account are federally tax-free, which can significantly ease the financial burden of higher education.
2. Private K–12 Education (Expanded in 2026)
Starting in 2026, families can use up to $20,000 per year per student from a 529 plan for K–12 education, a significant increase from the previous $10,000 limit. This includes expenses beyond tuition, such as tutoring, standardized test fees, and educational therapies for students with disabilities. This change is particularly beneficial for families considering private or alternative education paths, providing more flexibility and financial support.
3. Vocational Schools, Trade Programs, and Apprenticeships
529 plans now support a wider range of educational paths beyond the traditional four-year college degree. Funds can be used for community colleges, trade and vocational schools, registered apprenticeship programs, and even certain accredited online programs. Qualified expenses include tuition, fees, books, supplies, and required equipment, making these plans adaptable to diverse educational pursuits.
4. Professional Credentialing and Certifications (New Under OBBBA)
One of the most significant changes introduced by the OBBBA is the expansion of 529 plan usage to include postsecondary credentialing programs. Starting in July 2025, funds can be used for tuition, fees, books, supplies, testing, and recertification costs for careers such as HVAC, truck driving, dental hygiene, aviation maintenance, and other licensed professions. This makes 529 plans more applicable to non-traditional and evolving career paths.
5. Student Loan Repayment
529 plans can also be used to pay down student loans, up to $10,000 lifetime per beneficiary, with an additional $10,000 available for each sibling’s loans. This option provides a safety net if education costs were lower than expected or if scholarships were awarded, offering families flexibility and financial relief.
6. Rolling Leftover Funds into a Roth IRA
If the education costs are lower than anticipated, unused 529 funds can be rolled into a Roth IRA for the beneficiary, tax- and penalty-free, subject to certain conditions. The 529 account must be at least 15 years old, and funds must have been in the account for at least five years. Rollovers must stay within annual Roth contribution limits, with a lifetime maximum of $35,000 per beneficiary. This provision reduces the fear of overfunding a 529 plan, providing a strategic tax-advantaged savings vehicle.
What Happens If You Don’t Use a 529 for Qualified Expenses?
If funds are withdrawn for non-qualified purposes, contributions come out tax-free, but earnings are subject to ordinary income tax and a 10% federal penalty on earnings. State income tax may also apply, depending on the state, making it crucial to use 529 funds for qualified expenses whenever possible.
Who Can Contribute and How Much?
Anyone can contribute to a 529 plan, including parents, grandparents, family members, and friends. There are no income limits for contributions. For gift tax purposes, individuals can contribute up to $19,000 per year per beneficiary, while married couples can contribute up to $38,000 per year. "Superfunding" allows for contributing up to five years of gifts at once, which can be $95,000 for individuals or $190,000 for couples, subject to IRS rules.
Why Many Families Front-Load 529 Contributions
A growing trend is to contribute more heavily in a child’s early years and invest those dollars long-term. This approach allows for more time for compound growth, greater flexibility as education paths evolve, and reduced pressure when tuition bills arrive. Even modest early contributions can grow significantly over time when invested appropriately.
Missouri-Specific 529 Benefits
In Missouri, contributions to the state’s 529 plan are tax-deductible, up to $8,000 per taxpayer and $16,000 for married couples filing jointly. This deduction applies whether the account is for your child, grandchild, or yourself. Missouri also allows deductions for contributions to another state’s 529 plan if it qualifies, providing flexibility in plan selection. As always, state tax treatment varies, and not all withdrawals may qualify for state-level tax benefits.
The Bigger Picture
529 plans are no longer just college savings accounts. They have evolved into a flexible education funding tool, a means to support non-traditional career paths, a tax-advantaged gifting strategy, and a long-term planning vehicle that adapts to life changes. With expanded uses, Roth rollover options, and state-level benefits, the risk of "getting it wrong" with a 529 is lower than ever. The key is intentional planning, not perfection.
Disclosures:
This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.
Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.
A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.