Key Updates to 529 College Savings Plans Under the One Big Beautiful Bill Act: What Families Need to Know for Smarter Education Savings
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Discover expanded benefits, new expense limits, and enhanced rollover options for 529 College Savings Plans under the One Big Beautiful Bill Act.
Saving for education is a top priority for many families, and 529 college savings plans have long been a popular way to set aside funds for future learning expenses. While school was out and summer was in full force, Congress passed the One Big Beautiful Bill Act (OBBBA). As summer ends and kids return to the classroom, we thought it was an opportune time to provide a number of updates specifically related to 529 College Savings Plans.
1. Increased K-12 Expense Limits
One of the most notable updates is the increase in the annual limit for K-12 education expenses. Starting in 2026, families can use up to $20,000 per year from a 529 plan for eligible K-12 costs, doubling the previous limit of $10,000. This change provides more flexibility for those considering private school tuition, tutoring, or other educational support before college. It is important to remember though that the main financial benefit of utilizing a 529 plan account is the avoidance of paying capital gains tax on the earnings in the account. Generally speaking, the longer the funds are in the account, the more tax benefit there is thanks to the power of compounding interest.
2. Expanded Qualified Expenses
OBBBA broadens the definition of what counts as a qualified education expense. In addition to traditional college costs, families can now use 529 funds for:
- Vocational and certificate programs including apprenticeships and career training programs registered under the Workforce Innovation Opportunity Act
- K-12 expenses such as tutoring, standardized test fees, and certain nontraditional learning programs
- Fees for standardized tests (e.g. SAT, ACT), AP exams, and dual-enrollment programs
- Specialized services for students with learning differences, including ADHD support and executive functioning coaching
This expansion recognizes that every student’s educational journey is unique and supports a wider range of learning opportunities.
3. Improved Rollover Options
OBBBA maintains and clarifies the ability to roll over up to $35,000 lifetime in unused 529 funds into a Roth IRA for the beneficiary, provided certain conditions are met (such as the account being open for at least 15 years and the beneficiary having earned income). Rollover amounts are subject to the annual Roth IRA contribution limits ($7,000 in 2025) and the beneficiary must have earned income at least equal to the rollover amount.
4. Grandparent-Owned 529 Plans and Financial Aid
Distributions from grandparent-owned 529 plans will no longer count as untaxed student income for federal financial aid calculations. This adjustment makes it easier for grandparents to contribute to their grandchildren’s education without affecting eligibility for need-based aid.
The One Big Beautiful Bill Act brings several positive changes to 529 college savings plans, making them more flexible and accessible for families. With higher limits, expanded uses, and improved rollover options, it’s easier than ever to save for a wide range of educational needs. Whether you’re planning for private school, vocational training, or traditional college, these updates help you support your child’s learning journey with confidence. As always, be sure to review your state’s specific rules to maximize your savings strategy.
Your Next Steps with OneDigital
To understand how these updates to 529 College Savings Plans may affect your education savings strategy and to determine the best next steps for your individual goals, contact your OneDigital advisor today for personalized guidance.
Sources:
- Breaking Down The “One Big Beautiful Bill Act” (OBBBA)
- Key Changes in OBBBA Enhance Saving Options — Ascensus
- How the One Big Beautiful Bill Act Will Reshape 529 Plans | Kiplinger
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