Qualified education expenses expand with recent legislation

Recent legislation offers your clients more possibilities for their 529 funds.

H.R. 1 was passed by the 119^th Congress and signed into law on July 4, 2025, and includes provisions that impact 529 plans.

K-12 expenses

H.R. 1 (119^th Congress) expanded the definition of qualified education expenses for K-12 education to include books, materials, testing fees, dual enrollment fees, educational therapies and tutoring costs. Previously, 529 funds could be applied only to tuition expenses.

As of July 5, 2025, account owners can use 529 funds for these new qualified K-12 expenses.The legislation applies to K-12 attendance or enrollment at a public, private or religious elementary or secondary school.

The newly expanded K-12 education expenses include:

• Tuition.
• Curriculum and curricular materials.
• Books or other instructional materials.
• Online educational materials.
• Tuition for tutoring or educational classes outside of the home, including at a tutoring facility. The tutor cannot be related to the student and must qualify as one of the following:
  • A licensed teacher.
  • A current or former teacher at an eligible educational institution.
  • A subject matter expert in the relevant subject.
• Fees for a nationally standardized achievement test, an Advanced Placement examination, or any college admissions/entrance exam (e.g., SAT, ACT, etc.).
• Fees for dual enrollment in an institution of higher education.
• Educational therapies for students with disabilities provided by a licensed or accredited practitioner or provider, including occupational, behavioral, physical and speech-language therapies.

Spending limit for all K-12 expenses increases January 1, 2026

The new law increased the total limit for all K-12 expenses to $20,000 per year beginning January 1, 2026. The previous limit was $10,000.

Postsecondary credentials (post-high school)

529 funds can now be used on qualified postsecondary credentialing expenses if the beneficiary is enrolled in a recognized postsecondary credential program. To qualify, credential programs must be one of the following:

• Authorized by the Workforce Innovation and Opportunity Act.
• Credentials for military personnel and veterans.
• Licenses issued or recognized by the federal or state government.
• Credentials approved by national credential organizations.
• Requires an examination to obtain or maintain the credential.

As of July 5, 2025,the law allows tuition, fees, books, supplies and equipment required for participation, as well as fees for testing or continuing education if required to obtain or maintain the credential.

Rollovers from 529 accounts to ABLE accounts

A provision allowing 529 savers to roll funds to an ABLE account for the beneficiary or a member of the family of the beneficiary was previously set to expire on December 31, 2025. However, the legislation has removed this expiration date, meaning rollovers from 529 accounts to ABLE accounts are now permitted beyond 2025.

Increase to estate and gift tax lifetime credit

For estates of decedents and gifts made after December 31, 2025, the legislation increases the lifetime unified credit applicable to estate tax and gift tax to $15 million, subject to inflation adjustments.

The IRS has not issued specific guidance on the recent federal law changes affecting 529 plans, or on the increase to the lifetime estate and gift tax credit. The account owner will be responsible for any taxes or penalties resulting from failure to comply with the federal law changes and any subsequent IRS rules or guidance. If the IRS issues rules or guidance that materially changes the information set forth in the my529 Program Description, my529 will provide updates.

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For more details on the enhancements to qualified education expenses, check out our blog at my529.org.

From the FAN — December 2025