New Year’s Resolution: Commit to Saving for Education in 2026
As you step into 2026, it’s the perfect time to make a New Year’s resolution that delivers lasting impact: investing in a loved one’s future education through a 529 plan. One of the most achievable goals you can set is regularly contributing to your child’s 529 education savings account with The Education Plan®. A 529 account not only covers many college expenses, but also provides tax advantages and can help combat the rising cost of education. It's a practical, useful and very doable resolution. Here are just a few reasons to commit to saving in 2026.
Tax Advantages
By contributing to a 529 education savings account, you will not only help your child better afford college, but also experience tax advantages for yourself. You pay no federal taxes on earnings or withdrawals, as long as the 529 funds are used for qualified education expenses. And, contributions are compounded, meaning that any earnings are reinvested in the savings account, and have the opportunity to grow over time. If you are a New Mexico resident, you may also claim an annual state income tax deduction for all contributions to the account if the funds are used to pay for qualified expenses. Traditional savings accounts do not provide these tax advantages.
Flexibility
Contributing to a 529 account for your children is not limited to a one-time resolution, but it’s an investment that has the potential to keep on growing. You may open an account for your children at any age, whether they are 2 or 20, at any time, with any amount (as long as your contribution does not go over the lifetime maximum of $500,000 per beneficiary).
Comprehensive Coverage
The funds from a 529 education savings account can be used for qualified education expenses. Qualified education expenses include tuition, room and board, textbooks, lab fees, computers, internet, and software, if they are used for academic purposes. Funds may be used at most four- or two-year colleges, vocational schools, professional schools, community colleges and graduate schools nationwide. And the funds can be used for K-12 tuition and expenses, apprenticeship expenses, credentialing fees, and more. One caveat: if you spend the funds on non-qualified expenses, such as transportation or cell phones, your withdrawals are subject to tax and a 10% penalty on earnings.
Ease of Use
One of the easiest ways to contribute to a 529 education savings account is by setting up automatic payments from your bank account an Automatic Investment Plan. When you receive a raise or other salary incentive, consider increasing your automatic contributions to celebrate these accomplishments. With this relatively simple action, you can grow your child’s investment steadily over time. Lump sums from refunds, rebates, bonuses, gifts, or rollovers are also good investment sources. In fact, others may be similarly motivated to support your children’s academic aspirations through a gift contribution to your 529 account. The Education Plan makes it easy through Ugift, which provides a unique code that you can share with friends and relatives. Downloadable and printable gift certificates are also available.
The Smart Choice
Contributing to a 529 education savings account can be a priority all year. Setting a commitment to contribute every month at the start of the year is a great way to make sure it continues to happen. With the kickoff of a new year, be sure to make a lasting commitment to your children’s future education and help them graduate with less debt.
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
