Have you been putting off opening a 529 education savings plan because it seemed too focused on distant college costs?
You're not alone, over 77% of families with children still haven't opened these accounts, often because the benefits felt too far away to matter.
That just changed. New legislation doubled the annual withdrawal limit for K-12 expenses from $10,000 to $20,000 per student and expanded what counts as qualified education costs.
This means you can now use tax-advantaged 529 funds for tutoring, test prep, and educational materials you're likely already paying for out-of-pocket.
After helping many families navigate education planning decisions, I've seen how these "college-only" assumptions keep parents from accessing valuable tax benefits for expenses they're already covering.
Here’s what you’ll learn:
• What’s really happening with the new 529 rules
• Why it matters for your current education spending
• Small steps to get started without overwhelm
• How to move forward with clarity on your options
Let’s break down what’s really going on, and what it means for you.
A new federal law, the One Big Beautiful Bill Act (OBBBA) signed on July 4, 2025, introduced major updates to how 529 education savings plans can be used.
Starting January 1, 2026, the annual withdrawal limit for K-12 education expenses will double, from $10,000 to $20,000 per student, per year.
But that's not all. The law also expanded what counts as qualified education expenses, effective for distributions after July 4, 2025.
This means you can now use tax-advantaged 529 funds for tutoring, curriculum materials, online learning tools, and standardized test fees - educational costs many families already cover out-of-pocket with after-tax dollars.
I've seen firsthand how the "college-only" mindset keeps parents from unlocking these tax benefits sooner. Let's change that.
For families with multiple children, these updates are substantial:
The expanded definition of "qualified expenses" now covers:
These are all areas where families are already spending money, and now those expenses can be paid tax-free using 529 savings (as long as they meet federal and state requirements).
These changes tackle one of the biggest barriers I've seen with families: the belief that 529 plans only make sense for future college costs.
Now, you can see immediate benefits from your 529. Instead of waiting 10–15 years to use the funds, you can start covering legitimate education expenses you're already paying for, and get tax savings along the way.
If you're in the 22% tax bracket and spend $5,000 a year on tutoring and educational materials, using 529 funds instead of after-tax dollars can save roughly $1,100 per year in taxes.
Over five years, that's $5,500 saved, money that stays in your pocket instead of going to the IRS.
And for larger families, the expanded limits mean 529 plans finally make practical sense, even for those with ongoing K-12 education costs.
Before you dive in, here are a few things to keep in mind:
Effective dates: The expanded qualified expenses apply to distributions after July 4, 2025, while the $20,000 annual limit takes effect January 1, 2026.
State conformity: Not all states automatically follow federal rules. Some states may take time to update their definitions of "qualified expenses" or tax deductions. Always check your state's plan website before making withdrawals.
Tutoring & test prep: While covered under the new federal law, documentation matters. Tutoring must generally be provided by a qualified, non-family educator, and families should keep detailed receipts and records in case of IRS questions.
Tax implications: The tax-free benefit applies to qualified withdrawals, but only the earnings portion is tax-exempt. If withdrawn funds aren't used for qualified expenses, they may incur taxes and penalties.
If you don't have a 529 plan yet, here's a simple roadmap to begin:
The expanded 529 rules represent one of the most family-friendly updates in years, allowing you to use education savings plans for both today's learning costs and tomorrow's college goals.
Even small, consistent contributions can now deliver immediate tax benefits while building long-term financial flexibility. The key is simply starting, and doing it in a way that fits your family's current spending and comfort level.
If you're unsure where to begin, you're not alone. Many parents find it helpful to talk through their options with a financial professional who understands both tax strategy and education planning.
At InFocus, we specialize in helping families build education funding strategies that reduce stress, maximize benefits, and adapt as your children grow. We have many resources designed to make financial planning simpler and less stressful specifically for ADHDers.
You can download our free ADHD & Money eBook to discover why traditional budgets often fail and what actually works.
Important Note: This information is for educational purposes only and is not intended as tax or investment advice. State laws and tax treatment may vary. Please consult a qualified tax professional before making decisions regarding 529 plans or educational savings.