529 Plan Enhancements
529 Plan Enhancements: What Recent Federal Legislation (H.R. 1) Means for Families Saving for Future Education
Big news for education savings: The recently passed federal legislation (H.R. 1*) introduces major updates to 529 plans, giving families more ways to save and use funds for education and beyond. Here’s a clear breakdown of what changed, why it matters, and how you can make the most of it, whether you’re already saving with The Education Plan® or are considering opening a 529.
What Is a 529 Plan?
A 529 plan is a tax-advantaged savings account designed to help families pay for qualified education expenses. Contributions grow tax-free, and withdrawals for qualified expenses, including tuition, books, and room and board, are tax-free. Bill H.R. 1 has expanded the flexibility of a 529 plan even further by expanding the definition of qualified expenses to include additional items.
Key 529 Plan Changes
K-12 Expenses
One of the biggest changes the bill makes is to how the funds in a 529 account can be used for K-12 education.
The bill increases the annual withdrawal limit for K-12 expenses from $10,000 to $20,000. This change will go into effect starting January 1st of 2026.
Alongside the increase in the amount you can withdraw for K-12 expenses, the bill expands the definition of qualified K-12 expenses. Previously, parents were only able to use 529 funds to pay for K-12 tuition. Qualified K-12 expenses now also include:
-
Curriculum, books, and other instructional materials
-
Online educational resources
-
Tutoring (from qualified tutors)
-
Educational therapies for students with disabilities
-
Dual enrollment tuition (four courses taken during high school)
-
Standardized test fees (including the SAT and ACT)
These changes make a 529 plan even more flexible for parents who want or need to use the funds before a student graduates from high school.
Vocational Programs
Previously, 529 plans could be used to pay for apprenticeship expenses. Because of H.R. 1, funds can now also be used for many post-secondary vocational programs that aren’t offered in a traditional college setting. Qualified expenses include tuition, as well as preparation and exam fees, and continuing education needs to maintain certifications.
The program must meet certain requirements to be considered eligible. If you’re interested in a specific program, check the federal government’s WEAMS (Web Enabled Approval Management System) database or your state’s Workforce Innovation and Opportunity Act (WIOA) directory. You can find New Mexico’s WIOA directory here.
These changes give students who aren’t interested in traditional 2- or 4-year college programs expanded opportunities to further their careers.
Credentialing and Licensing
In addition to including vocational programs, the bill also allows 529 funds to be used for expenses related to professional licensing and certification programs. This can include exam fees, certification courses, required continuing education programs, and more.
This new benefit is particularly beneficial for adult students who may be switching careers, returning to the workforce, or expanding their professional certifications.
ABLE Accounts
Starting in 2026, the bill will make permanent several qualified expenses related to ABLE accounts that were set to expire. This includes the ability to rollover funds from a 529 account into an ABLE account without tax penalties.
This benefit gives families who have children with disabilities the flexibility to create the best savings strategy for their situation.
Why These Changes Matter
Flexibility
A 529 plan has always been a flexible way to save for future education expenses. That flexibility just got even better. H.R. 1’s expansions to 529 plan rules give families greater freedom to use their funds for a wide range of educational expenses, including K-12 expenses outside of tuition.
Tax Advantages
The tax advantages of a 529 plan offer families a smart way to save for a wide range of educational needs. These advantages have stayed in place as the qualified uses of a 529 plan have expanded with the bill.
More Career Pathways
The expanded uses of a 529 plan focus on career pathways outside of higher education. Now, students who want alternatives to a traditional college education have even more options.
What Should You Do Next?
Already saving with The Education Plan? Log in and evaluate your savings goal, including current contribution amounts. Considering opening a 529 plan? You can start saving today with The Education Plan.
*The legislation, now formally titled H.R. 1 was originally introduced under the informal name Big Beautiful Bill. While “H.R. 1” is the official designation used in Congress, the earlier nickname is sometimes referenced in discussions about the proposal.
This information is for general educational purposes and should not be considered financial advice or tax advice. We recommend consulting with a tax professional or financial advisor for personalized guidance.
Frequently Asked Questions
A 529 plan is a tax-advantaged investment account that is designed to grow savings for future education expenses for a specified beneficiary. 529 plans offer unique benefits and features that make them an appealing strategy for education related saving.
A 529 plan can be used for “qualified educational expenses.” For federal tax purposes, qualified educational expenses include:
- Tuition and fees at accredited higher education institutions
- Books
- Supplies and equipment
- Room and board for beneficiaries attending on at least a half-time basis.
- Computer technology, equipment, and internet access
- Up to $10,000 a year for K-12 tuition and expenses (Limit increase to $20,000 in 2026)
- Expenses for educational special needs services
- Transfers to an ABLE account for the beneficiary (transfer subject to annual limit)
- Apprenticeship expenses
- Up to $10,000 for student loan repayment
- Credentialing expenses and certification programs
- Roth IRA rollover for the beneficiary
If you're not sure if an expense is considered "qualified," we recommend consulting with a tax professional or advisor. Unqualified expenses will be treated like ordinary income: state and federal taxes will apply, with a 10% federal penalty for withdrawals from your 529 plan used to pay for them.
New Mexico residents can deduct contributions to The Education Plan from their state taxable income each year. This includes contributions made to an account that you are not the account owner of.
You cannot deduct contributions from federal income taxes.
Any person at least 18 years old with a valid Social Security Number (SSN) or Tax Identification Number (TIN) can open a 529 account. The account holder chooses the investment options, designates a beneficiary, and requests the distribution of funds.
The cost of college continues to rise, including tuition, housing, food and supplies, so it’s important to begin saving as soon as possible. You can learn more about how much a typical college education costs on our Cost of College page. It’s never too early or too late to start.
The Education Plan offers a variety of investment options to fit you and your family’s needs, risk tolerance and goals. You can see all of the available investment portfolios on the investments page.
Yes, you can use up to $20,000* a year to cover tuition and expenses for K-12 education.
Qualified K-12 expenses include:
- Tuition (public, private, and religious)
- Curriculum materials, books (including digital/online) and instructional materials
- Tutoring and instructional classes**
- Fees for a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission
- Dual enrollment program fees
Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical, and speech-language therapies
*Starting in tax year 2026. The annual limit is $10,000 in tax year 2025 and permitted for tuition only.
**Tuition for tutoring or educational classes outside of the home, including at a tutoring facility, but only if the tutor or instructor is not related to the student and—
(i) is licensed as a teacher in any State,
(ii) has taught at an eligible educational institution,
or (iii) is a subject matter expert in the relevant subject.
You can open an account with The Education Plan online or by mailing in the enrollment form. In order to open an account, you will need the following information:
- Your social security number or TIN
- Your address
- Your bank account information (in order to fund the account)
- The beneficiary’s social security number or TIN
- The beneficiary’s birthday
-The beneficiary’s address
