Section 529 plans are tax-advantaged savings plans that allow families to save money for educational expenses. Sometimes referred to as “qualified education (or tuition) plans”, 529 accounts allow contributions to grow tax-deferred, and these dollars may be withdrawn federal income tax-free when used for qualified education costs.
A brief history…
Section 529 was originally created by Congress in 1996, creating a set of federal tax rules for education savings. Since then, many states have set up their own 529 plans (classified as either a tuition savings plan or a prepaid tuition plan). Depending on the state, these plans may offer additional state income tax benefits for contributions in a calendar year.
In December 2022, Congress passed the Secure Act 2.0, which provided several updates to 529 plan rules. Most notably, it allowed the ability to convert unused 529 plan dollars into a Roth IRA for the beneficiary, subject to specific rules, limits and eligibility requirements.
More recently, in July 2025, Congress passed the One Big Beautiful Bill Act (OBBBA) which added additional 529 plan flexibility including:
- Increased K-12 education tax-free distributions for expenses (tuition, fees, books) up to $20,000 (this was previously limited to $10,000).
- Funds can now be used to pay for trade schools, vocational programs, tutoring and certain professional licensing & certifications exams (such as CPA and nursing exams).
529 plans continue to evolve as the tax code has changed over the years. While the original focus of Section 529 in the Internal Revenue Code was intended for higher education (i.e. college and university expenses), recent changes under OBBBA have expanded their usefulness beyond college to include K-12 education and career-focused training. Higher limits and expanded usage provide families with greater tax benefits and more ways to use these dollars than in the past.
For additional details, visit the IRS resource on 529 plans: https://www.irs.gov/newsroom/529-plans-questions-and-answers
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