What the OBBBA Means for 529 College Savings Plans
September 5, 2025
Last month, we shared an overview of the One Big Beautiful Bill Act (OBBBA). This month, as a new school year begins, we’re turning our attention to some important updates the law introduced for 529 college savings plans—updates that could change the way families save and pay for education.
A Quick Refresher on 529 Plans
There are two main types of 529 plans:
● Prepaid tuition plans – These allow you to lock in today’s tuition rates by purchasing credits at participating schools for future use. While less common, they can provide certainty against rising tuition costs.
● 529 savings plans – The more popular option, these let you invest in stocks, bonds, mutual funds, ETFs, or other vehicles. Earnings in the account grow tax-free, and qualified withdrawals for education expenses are also tax-free.
Most states with income taxes also offer a deduction or credit for contributions, which makes them even more attractive.
Despite these advantages, only about 10% of parents use 529 plans, according to a recent Vanguard survey. Most rely instead on regular checking or savings accounts, which don’t provide the same tax benefits or growth potential.
What’s New Under the OBBBA?
The OBBBA makes 529 plans more flexible and valuable for families by expanding what counts as a qualified expense:
K–12 education expenses – Previously capped at $10,000 per year for tuition, the list now includes:
● Books, curricular and online materials
● Tutoring or educational classes outside the home
● Standardized testing fees (ACT, SAT, etc.)
● Educational therapies for students with disabilities
● Tuition at public, private, or religious schools
● Starting January 1, 2026, the withdrawal cap for K–12 expenses doubles to $20,000 per year.
Job training and credentialing programs – Withdrawals can now cover a wider range of programs, including:
● Skilled trades (HVAC, welding, plumbing, electrical work, commercial driving, cosmetology)
● Professional certifications (CPA, bar exam, nursing, real estate, teaching, etc.)
● Continuing education requirements for maintaining licenses
● Related books, supplies, and equipment
ABLE account rollovers – Families can now indefinitely roll over unused 529 funds into an ABLE account (a tax-advantaged account for individuals with disabilities) without taxes or penalties. This change gives families greater flexibility and peace of mind.
Contribution Rules and Opportunities
529 contributions don’t have a set federal annual cap, but they are considered gifts for tax purposes:
● In 2025, the annual gift tax exclusion will be $19,000 per beneficiary (or $38,000 for married couples).
● States impose lifetime limits, usually between $235,000 and $500,000+.
● The “superfunding” option allows you to contribute five years’ worth of gifts at once—up to $95,000 in 2025—without gift tax implications, provided no other contributions are made for that beneficiary during the five-year period.
Why This Matters Now
With these expanded rules, 529 plans aren’t just for college anymore. They can support K–12 education, vocational training, professional development, and even provide additional flexibility for families with special needs.
If you haven’t reviewed your education savings strategy recently, now is a great time to do so. These new provisions could open opportunities to better align your savings with your family’s goals.
Final Thoughts
A 529 plan continues to be one of the most versatile, tax-advantaged ways to save for education. The OBBBA’s changes make them even more valuable.
If you’d like help tailoring a 529 strategy to your family’s needs—or simply want to review your current plan—we’re here to guide you. As always, be sure to consult your tax advisor with any specific tax-related questions.
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Disclosure:
This information is an overview and should not be considered as specific guidance or recommendations for any individual or business.
This material is provided as a courtesy and for educational purposes only.
These are the views of the author, not the named Representative or Advisory Services Network, LLC, and should not be construed as investment advice. Neither the named Representative nor Advisory Services Network, LLC gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. Please consult your Financial Advisor for further information.