Unlocking New Opportunities: How The One Big Beautiful Bill Act Transforms 529 Plans

November 19, 2025

Expanded Flexibility & Tax Benefits For Education Savings

What Is A 529 Plan?

A 529 Plan, also known as a Qualified Tuition Program (QTP), is a tax-advantaged savings plan designed to encourage saving for future education costs. These plans are established and maintained by states or eligible educational institutions and offer two main types: prepaid tuition plans and education savings plans.

QTP contributions are made with after-tax dollars, but earnings grow tax-free, and distributions are tax-free if used for qualified education expenses. 529 plans provide flexibility in beneficiary designation and allow for rollovers to other family members or, under certain circumstances, to other types of accounts.

Key Enhancements Under The One Big Beautiful Bill Act (OBBBA)

The OBBBA, enacted in July 2025, made several significant enhancements to 529 plans, further broadening their utility and flexibility. The following bullet points outline these enhancements.

Expanded Definition Of Qualified Expenses

Vocational, Credentialing, & Licensing Programs: The definition of qualified higher education expenses now explicitly includes tuition, fees, books, supplies, and equipment for recognized postsecondary credential programs, such as vocational training, professional certifications, and licensing. This expansion allows 529 funds to be used for a wider range of career paths, including nontraditional and technical fields. This enhancement is effective for distributions after the enactment date, July 4, 2025.

Additional K-12 Expenses: Qualified expenses for K-12 education now include tuition and curriculum and curricular materials, books, online educational materials, tutoring (with certain requirements for tutors), standardized test fees, dual enrollment fees, and educational therapies for students with disabilities. This enhancement is effective for distributions after the enactment date, July 4, 2025.

Annual K-12 Limit Increased: The annual limit for K-12 expenses paid from a 529 plan was doubled from $10,000 to $20,000 per beneficiary per year, effective for taxable years beginning after December 31, 2025.

Rollovers to ABLE Accounts: The OBBBA made the ability to roll over funds from a 529 plan to an ABLE account (a tax-advantaged savings account for individuals with disabilities) permanent, which removed the prior sunset date. This enhancement is effective after December 31, 2025.

Summary Of Key Qualified Tuition Program Enhancements

Feature/Expense Type	Prior Law (pre-OBBBA)	OBBBA Enhancement (2025)
K-12 Tuition Limit	$10,000/per year per beneficiary	$20,000/year per beneficiary
K-12 Qualified Expenses	Tuition only (plus some materials)	Tuition, curriculum, books, online materials, tutoring, test fees, & therapies
Postsecondary Credentialing, including Professional Exams	Not explicitly included	Tuition, fees, books, supplies, equipment, testing, & continuing education for credentialing programs
Rollovers to ABLE Accounts	Temporary, set to expire	Made permanent
Roth IRA Rollovers	Allowed (SECURE 2.0, 2024)	No change (remains in effect)

What Do These Changes Mean for Families?

Broader Use: 529 plans can now be used for a much wider array of educational and career-related expenses, including vocational training, apprenticeships, and professional licensing.
Increased Flexibility: Families with 529 funds leftover have more options, including using funds for professional exams or rolling over to a Roth IRA or ABLE account.
Tax Efficiency: The expansion increases the tax efficiency and utility of 529 plans for a broader range of beneficiaries and career paths.
State Tax Considerations: While federal law governs the tax treatment of 529 plans, states may have their own rules regarding deductions, credits, and recapture if funds are not used for qualified expenses.

The OBBBA marks a pivotal moment for education savings, making 529 plans more versatile and accessible than ever before. Whether you’re planning for K-12, vocational training, or higher education, these changes offer families greater flexibility and enhanced tax benefits. To ensure you’re maximizing your 529 plan’s potential and navigating federal and state rules effectively, contact GBQ for expert guidance and support.

By Tara Bollinger, CPA, CMA, CGMA, Director, Tax & Advisory