OBBBA Brings Big Changes to 529 Plans and New Opportunities for Families

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, didn’t just tweak the tax code—it introduced one of the most significant expansions to 529 plans in years.

Tucked inside its hundreds of pages are new, flexible ways to use this powerful savings tool, making it more accessible and useful for families planning for education costs, both traditional and nontraditional.

If you already use a 529 plan or are thinking about opening one, these changes offer greater flexibility and new ways to support a range of educational paths. Here’s what’s changing, when it takes effect, and how to make the most of the new rules.

What Is a 529 Plan and How Does It Work?

A 529 plan is a state-sponsored, tax-advantaged savings account designed to help families save and invest money specifically for education-related expenses. While contributions to a 529 plan aren’t tax-deductible (at least on the federal level), the funds in the account do grow tax-deferred, and withdrawals for qualified expenses are tax-free.

Dating back to 1986 (though officially offered at the federal level starting in 1996), 529 plans have traditionally been associated with helping families cover the cost of college tuition. In recent years, however, legislators have expanded their uses and qualifying expenses to include K–12 tuition, certain apprenticeship programs, and even limited rollovers to Roth IRAs.

New 529 Plan Rules: What the OBBBA Changed

The OBBBA has expanded the use of 529 plans, allowing families to make more tax- and penalty-free withdrawals on expenses relating to a child’s education or professional development. Let’s take a closer look at what’s changed.

Expanded Support for Higher Education and Career Training

Starting July 2025, 529 funds can now cover even more costs for those looking to expand their skillset after high school.

In addition to the traditional college tuition and room and board qualifying expenses, beneficiaries can now use the funds in a 529 plan to cover things like:

• Trade schools

• Credentialing programs and professional licensing (eg, CPA exams)

• Training or certifications (eg, commercial driver's license training, HVAC, electrician certifications, etc.)

To verify if a program qualifies, check the WEAMS and the WIOA databases.

More Support for K–12 Learning

The OBBBA also expands what 529 plans can cover at the K–12 level. In addition to tuition, funds can now pay for related expenses, including:

• Tutoring services

• Online learning tools

• Educational therapies

• Standardized test fees (like the SAT and ACT)

• Dual-enrollment college courses

Prior to these changes, 529 plans were fairly limited in how they could be used to support a child’s K-12 journey (primarily covering only private school tuition). The changes established in the OBBBA offer families, including those with children at public schools, more opportunities to cover supplemental costs and access specialized resources for learning improvement.

In addition to expanding access to other qualified expenses, the annual limit for K-12 withdrawals is set to double from $10,000 to $20,000 per child starting in 2026.

Permanent Option for ABLE Account Rollovers

Previously, families could roll unused 529 funds into a state-sponsored ABLE account, which supports individuals with disabilities. This provision was set to expire at the end of 2025, but the OBBBA makes it permanent, providing more planning flexibility for families who need to shift funds to support a child’s disability-related expenses.

Contributions to these ABLE accounts will also remain eligible for the Saver’s Credit. Initially, this provision was set to expire in 2025 as well.

What These 529 Plan Changes Mean for Families

New eligible expenses for both higher education and K-12 went into effect as soon as the OBBBA was signed on July 4, 2025. The higher K-12 withdrawal cap ($20,000) will start in 2026. Currently, there are no expiration dates set on these expanded provisions.

These updates make 529 plans more versatile investment vehicles for families who feel their children may not pursue a traditional educational track. Beyond being considered a “college savings account,” a 529 can now support other learning paths, including trade schools, professional certifications, and supplemental K–12 educational support.

Is a 529 Plan Right for Your Family’s Education Goals?

If you’re just getting started on your savings journey, the OBBBA’s expanded 529 plan rules make this education savings tool more flexible and valuable than ever. Under the 2025 One Big Beautiful Bill Act (OBBBA), 529 plans can now cover a broader range of qualified expenses, including higher education, career training, and expanded K–12 learning costs, with the K–12 withdrawal cap doubling in 2026. Families can also permanently roll unused funds into ABLE accounts for disability-related expenses. These OBBBA 529 changes give parents and grandparents more ways to customize education savings strategies to fit their children’s unique learning paths and long-term goals.

We can help you review your options and design an education savings strategy that takes full advantage of this and other OBBBA changes.

John J. Diak, CFP® is the Principal & Client Wealth Manager at Oatley & Diak, LLC in Parker, Colorado. He assists clients through many difficult lifestyle changes such as business downturns, retirement planning, divorce, the death of a spouse, and family estate issues among others. Oatley & Diak, LLC is a family-run registered investment advisory (RIA) firm that provides clients with investment management and financial planning services in a hands-on, intimate environment. Learn more about them at oatleydiak.com.

This material has been prepared in collaboration with Crystal Marketing Solutions, LLC, and has been edited with the assistance of artificial intelligence tools. The information presented is based on sources believed to be reliable and accurate at the time of publication. This material is for educational purposes only and does not necessarily reflect the views of the author, presenter, or affiliated organizations. It should not be construed as investment, tax, legal, or other professional advice. Always consult a qualified professional regarding your specific situation before making any decisions.