529 plans and the OBBBA: What you need to know

Education savings strategies continue to evolve alongside rising costs and shifting policy landscapes. With the passage of the One Big Beautiful Bill Act (OBBBA), families and advisors now have an expanded toolkit for using 529 plans and ABLE accounts. These updates introduce greater flexibility, higher withdrawal limits, and new categories of eligible expenses—reshaping how Americans plan and save for education at every stage.

A Legislative Shift in 529 Planning

Signed into law on July 4, 2025, the OBBBA introduced significant enhancements to how families can leverage 529 plans. The legislation expands the definition of qualified education expenses, raises withdrawal limits for K–12 education, and introduces enhanced flexibility for ABLE accounts.

For financial professionals and families planning for education expenses, these changes are not just incremental—they significantly broaden the scope of how 529 accounts can be used, both for primary and secondary education as well as for lifelong learning and credentialing programs.

Higher Withdrawal Limits for K–12 Education

Effective January 1, 2026, the annual withdrawal cap for K–12 education expenses will increase from $10,000 to $20,000¹.

This doubling of the limit offers greater support for families seeking to offset the rising costs of private, public, or parochial schooling. For advisors, this change opens new opportunities to highlight 529s as not just a college-savings tool, but a more holistic education funding vehicle.

Expansion of Qualified Expenses

Beginning July 5, 2025, the definition of “qualified expenses” has been significantly broadened. Families can now use 529 funds for a range of non-tuition K-12 expenses, including¹:

• Curriculum materials
• Fees for nationally standardized tests
• Books and other instructional resources
• Dual-enrollment course costs for high school students
• Online educational programs
• Tutoring and specialized educational services for students with disabilities

This expansion aligns 529 usage with the diverse and modern realities of K–12 education, where families increasingly rely on supplemental learning resources and digital platforms.

Credential Programs Now Included

The OBBBA also extends 529 eligibility to credential programs, marking a meaningful shift toward lifelong learning. Implemented on July 5, 2025, qualified credential expenses now include¹:

• Workforce Innovation and Opportunity Act (WIOA)-approved programs
• Credentials sanctioned by state or federal governments
• Military credentials
• Certifications authorized by recognized professional providers

This provision covers not just tuition, but also books, exams, and supplies, making 529s relevant for career advancement and re-skilling in a changing economy.

For clients considering second careers, workforce reintegration, or specialized training, this flexibility expands the role of 529s well beyond traditional education planning.

Fixed ABLE-Account Flexibility

Another important dimension of the OBBBA is the strengthening of ABLE accounts, which provide tax-advantaged savings for individuals with disabilities.

Effective January 1, 2026¹:

• The “ABLE-to-Work” initiative becomes permanent, allowing working beneficiaries to contribute beyond standard limits.
• Tax-free rollovers from 529 plans to ABLE accounts are now permanently available.
• Contributions to ABLE accounts will remain eligible for the Saver’s Credit.

These changes create a more durable bridge between education planning and long-term financial security for families with special needs considerations.

What This Means for Financial Professionals

The OBBBA represents a significant expansion of 529 plan utility, continuing a trend we’ve seen over the past decade. For advisors, the implications are clear:

• Broader conversations with clients – 529s can now be positioned not just for college, but for K–12, specialized learning, and career credentialing.
• New planning strategies – Higher K–12 withdrawal limits and expanded expense categories provide additional flexibility in how families structure education savings.
• Cross-over with ABLE planning – Advisors working with families who have children or dependents with disabilities will find more permanent and flexible pathways to support long-term financial needs.

By staying ahead of these changes, financial professionals can help families take full advantage of the evolving opportunities that 529s offer—across the entire educational spectrum and beyond.

Bottom line: The OBBBA fundamentally enhances the versatility of 529 plans, strengthening their role as a multi-stage education and financial planning tool.

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