OBBA Update - 529 Plans & Education
As part of our series on the One Big Beautiful Bill Act (OBBBA), we’re highlighting important updates to 529 plans, ABLE accounts, and the introduction of new Trump Accounts. These changes significantly expand flexibility for families, students, and adult learners planning for education or long-term financial needs.
Expanded Uses for 529 Plans
Traditionally, 529 accounts were focused on college tuition and certain K–12 costs. With the passage of OBBBA, their flexibility expands in meaningful ways—helping families with tutoring services, supplies and test fees as well as giving lifelong learners options to invest in their education.
Broader K–12 Expenses
- Families can now use 529 savings to cover:
- Curriculum and learning materials (books, workbooks, digital tools)
- Tutoring services (that meet qualifying requirements)
- Online education platforms or subscriptions
- Educational therapies for students with disabilities
- Standardized test fees (SAT, ACT, AP exams)
- Dual-enrollment tuition for college courses taken during high school
Higher K–12 Annual Limit
Starting in 2026, the annual distribution cap for K–12 expenses doubles from $10,000 to $20,000 per child, offering families greater flexibility to fund tuition and related educational costs.
Career Credentials and Licensing Programs
- 529 funds may now be used for a wide range of professional and trade credentials, such as CPA or bar exam fees, continuing education courses, or certifications in fields like welding, CDL training, HVAC, aviation mechanics, plumbing, or cosmetology.
- To qualify, programs must generally be recognized under the Workforce Innovation and Opportunity Act (WIOA), approved apprenticeship programs, or similar federal/state listings such as WEAMS.
Updates to ABLE Accounts
For individuals with disabilities and their families, OBBBA strengthens ABLE accounts by making several provisions permanent. These provisions apply beginning in tax year 2026. To learn more about ABLE Accounts, Click HERE
Introduction of Trump Accounts
OBBBA also creates a new savings vehicle known as a Trump Account—a type of starter IRA for children. Key features include:
- Federal Seed Contribution – Eligible children born between 2025 and 2028 receive a one-time $1,000 deposit.
- Contribution Limit – Families can contribute up to $5,000 annually (indexed for inflation). Employers, states, and nonprofits may also contribute.
- Investment Rules – Funds must be invested in low-cost U.S. equity index funds until the beneficiary turns 18.
- Withdrawal Rules – No withdrawals before age 18, except rollovers to ABLE accounts. After 18, standard IRA withdrawal rules apply.
Please note: Trump Accounts are designed for long-term savings, not short-term education expenses. Withdrawals for education before age 59½ may trigger taxes and penalties.
Many of these provisions take effect beginning in 2025 or 2026, so now is the time to evaluate how they fit into your broader financial strategy. The Barklee Financial Group team can help you assess which options align best with your goals and ensure you’re maximizing tax benefits under the new rules.
