Using a 529 Plan for Your Child's Early Education
For many parents, saving for a child's future education is a top priority. 529 plans are a popular option, allowing tax-advantaged investing for higher education costs. But did you know that recent changes allow you to use a 529 plan for K–12 tuition expenses, too? This gives families more options in planning for a child’s full educational journey.
529 Refresh: How It Works
First, a quick refresher on 529 plans. A 529 plan lets you invest money for future education expenses. Investments grow tax-free, and withdrawals are also tax-free when used for qualified expenses. These include tuition, room and board, books, computers, and more.
529 contributions are made with after-tax dollars, but many states offer tax deductions or credits for contributions. In New Mexico, contributions to a 529 account with The Education Plan are eligible for tax-deduction on New Mexico state income tax returns.
Accounts can be opened by parents, grandparents, or other relatives and friends. The beneficiary can later be changed to another qualifying family member if needed. While originally intended for college, 529 plans can now also assist with early education tuition expenses.
How to Use a 529 Plan for K-12 Tuition
In late 2017, the federal tax code was changed to allow 529 plan withdrawals of up to $10,000 annually per child for public, private and religious elementary or secondary school tuition.
It's important to understand the specifics of what is and isn't allowed, for example:
- Up to $10,000 can be withdrawn tax-free only for tuition expenses. Not for books, transportation, computers, or other costs.
- Not all states have adopted this new rule. Check your own state's 529 plan guidelines. New Mexico, where The Education Plan is sponsored, does allow withdrawals for K-12 tuition.
Strategic Times to Tap Into 529 Funds
Many 529 plans are structured for future education, and timing is important when using the funds for early schooling. Here are potential situations to consider:
1. The account is overfunded for college
If, through diligent saving, you've amassed more in your 529 than you believe will be needed for college, K-12 tuition may be a smart additional use. Paying for an eligible elementary, middle, or high school tuition expense lets you draw down potential surplus. Or you can change the beneficiary to a younger sibling and keep saving for the future. The account can be transferred between qualified family members with no tax penalties.
2. To capture state tax breaks
More than 30 states, including New Mexico, offer a state income tax deduction or credit for 529 contributions. If you'll be paying private school tuition anyway, it could be beneficial to deposit funds in a 529 plan.
3. As an available temporary solution
Some parents use a 529 withdrawal as a short-term fix if there's a disruption in income for a short time period, such as a medical event, a job change, or other loss of income. A $10,000 tuition payment from the 529 plan can help bridge the gap and keep a child enrolled while finances stabilize.
This strategy may only work for a limited time since the annual withdrawal maximum is $10,000 per child. It shouldn't replace careful budgeting.
If You’re Not Sure, Use Caution
While the new rules allow more possibilities for 529 savings, it’s also important to know when it may not make sense:
- Carefully consider withdrawals early in the beneficiary's life. The benefit of 529 plans is tax-free compound growth over many years. Withdrawals in early elementary school may limit this depending on your contribution and investment strategy.
- Be cautious of yearly limits. Since you can only use $10,000 per beneficiary annually for K–12 schools, tuition in excess of the limit will not be considered qualified.
529 Plans and Preschool: What You Need to Know
A common question is whether 529 plans can be used for preschool and early childhood education costs. Unfortunately, the answer is no—529 funds withdrawn for preschool tuition would not be a qualified expense.
Some reasons why:
- Preschool is not considered "elementary education" by the IRS definition. To qualify, a program must have a stated educational curriculum to be considered elementary. Most preschools and day care are classified as childcare only.
- Since children typically attend only part-day sessions in preschool and do not receive grades, credits, or graduation documentation, preschools don't meet the requirements of an eligible school.
- Expenses outside of K–12 tuition, like application fees, supplies, transportation, food programs, and extended day care, are not qualified expenses. So even if preschool was eligible, the costs often don't fall under the approved tuition-only rules.
Parents, therefore, cannot pay for preschool from 529 accounts in the same way as for elementary, middle, and high schools. Preschool costs need to be budgeted from normal income cash flow, savings, or other accounts.
That said, contributing regularly to a 529 during the preschool years is smart prep. This builds up a solid base for when the account can start being used for K–12 tuition later.
Start Saving Early for Education
With college costs continuing to rise, saving early for children's future education is key. And new tax law changes allow families more options by permitting 529 plan use for elementary and secondary school tuition.
This allows parents to potentially enhance their early education savings strategy. By understanding the specifics of how and when 529 funds can be tapped, you can make informed choices for your child's educational needs from preschool through college.
The tax benefits and flexibility of 529s make them a top choice for future education investing. And now K–12 tuition expenses can be considered as well when the timing and situation make sense. But be sure to consult with financial and tax advisors to map out a personalized education savings strategy that best fits your family's needs and budget.
What experiences do you have saving in a 529 plan? Do you plan to use the account for early education expenses or stick to the traditional college savings route? Share your thoughts with families like yours on our social channels.
Final Thoughts
Saving for your child's education is one of the most important investments you can make in their future success. By understanding all the options, you can develop a strategic savings approach. Start contributing to tax-advantaged 529 accounts as soon as possible and stay involved throughout the years. With proper planning and diligent saving, you'll be on your way to helping fund the education your child deserves.
Ready to start saving? You can open a 529 savings account with The Education Plan in about 15 minutes.
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
