If you save into a 529 plan for a kid in K-12, your annual withdrawal cap just doubled. And the list of things it can pay for got a lot longer. That is not a rumor. It is federal law now.
The One Big Beautiful Bill Act, signed last summer, quietly rewrote what a 529 is allowed to do. The K-12 withdrawal cap went from $10,000 to $20,000 per beneficiary per year, effective January 1, 2026 (Saving For College). The expanded qualified expense list, effective as of the July 2025 signing, added a lot: outside tutoring, curriculum materials, standardized test fees (SAT, ACT, AP exams), dual-enrollment tuition, and educational therapy for kids with disabilities (Chase).
Post-secondary got wider too. A 529 now covers credentialing programs the tax code used to snub, including welding, CDL training, HVAC, plumbing, cosmetology, and professional licensing exams like the CPA and the bar. If your kid is going into a trade, this is a real change.
Here’s what they don’t tell you. Plan providers went quiet for months while the plumbing settled. States are the reason. The federal changes are set, but each state runs its own 529 program and its own tax deduction rules, and not every state has updated its own conformity to match. Some states may still treat the expanded K-12 withdrawals as non-qualified for state tax purposes (Saving For College). Translation: your federal tax bill is clean, your state tax bill might not be.
Run the math. Say your kid attends a $22,000-a-year private school in a state that conformed. Under the old $10,000 cap, less than half of tuition could come out of the 529 tax-free, and the rest came from taxable money. Under the new $20,000 cap, almost the whole bill runs through the plan. That’s roughly $10,000 more per year in tax-free spending. On a 22% federal marginal rate, that’s about $2,200 saved every year the plan has the balance.
For a public-school family, the doubled cap matters less because tuition isn’t the bill. What matters is the expanded list. A season of after-school tutoring at $60 an hour, twice a week, adds up to about $6,000 a year. Now it’s a 529 expense. A one-week SAT prep boot camp is a 529 expense. AP test fees are a 529 expense. That is real money you were paying with taxable dollars.
Do this now. Before you cut a check for a tutor or a private-school invoice, ask your state’s 529 administrator two questions. One: has the state conformed to the new K-12 cap and the expanded expense list? Two: what documentation do I need to keep to prove the expense? If the state has not conformed, the withdrawal is still federally clean, but you may owe state income tax and possibly a state-level clawback of a prior deduction. Check your state’s 529 site or call before you spend, not after.
If you’re new to this, our education planning hub covers how a 529 fits with the rest of your college-savings picture.
One more move on the post-secondary side. The OBBBA also lets you roll up to $35,000 from a 529 into a Roth IRA over the beneficiary’s lifetime, provided the account has been open at least 15 years, the funds have sat for at least 5, and the kid has earned income equal to the rollover (Saving For College). If your kid skips college, wins a full ride, or picks the trade route, that is a way to move leftover 529 dollars into retirement money without a penalty.
The 529 stopped being just a college-tuition wrapper. Start using it that way.
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