Here’s some good news about 529 plans that could change how you think about education savings. For years, these accounts have been straightforward college savings vehicles: contributions grow tax-free, and withdrawals for qualified education expenses aren't taxed. Tuition, room and board, maybe some books. That's all changed. Recent federal legislation, specifically the SECURE 2.0 Act and the One Big Beautiful Bill Act (OBBBA), signed into law in July 2025, has transformed 529 plans into something far more flexible. They're no longer just college savings vehicles. They're now tools for K–12 education, skilled trades, and professional certifications. When reviewing a 529 plan, it's important to consider not only the state tax treatment but also any associated fees and expenses. Availability of a state tax deduction will depend on your state of residence, as state tax laws and treatment may vary from federal tax laws. If you make a non-qualified distribution for something other than school-related expenses, earnings will be subject to income tax and a 10% federal penalty tax. K–12 Education: Double the FlexibilityStarting with the 2026 tax year, the annual withdrawal limit for K–12 expenses doubles from $10,000 to $20,000 per student. But the OBBBA also broadened the definition of a "qualified expense" for younger students. We can now use 529 funds for:
This expansion gives parents support well before the first college bill arrives. Skilled Trades and Professional CredentialsNot every career path runs through a four-year university, and the new rules acknowledge that. The 529 now covers training and certification programs for skilled trades and professional licensing. Qualified expenses include tuition, books, equipment, and exam fees for programs like:
This change reflects a growing recognition of vocational and technical education. If your child is drawn to the skilled trades or needs continuing education to maintain a professional credential, a 529 can help . The 529-to-Roth IRA RolloverOne of the longstanding concerns we've heard about 529 plans has been the risk of overfunding. What happens if your child doesn't go to college, or doesn't use all the money we've saved? The SECURE 2.0 Act addressed this by allowing up to $35,000 in unused 529 funds to be rolled over into a Roth IRA for the beneficiary—tax-free and penalty-free. The account must have been open for at least 15 years, and rollovers are subject to annual Roth IRA contribution limits ($7,500 in 2026). Contributions made within the last five years (and their earnings) aren't eligible. Also, the original Roth IRA owner is not required to take minimum annual withdrawals. This provision helps address some of the downside risk of saving too much. If your child receives scholarships, chooses a less expensive school, or takes a different path entirely, those unused funds can be moved. Permanent Support for Families with DisabilitiesThe OBBBA also made permanent the ability to roll 529 funds into an ABLE account—a tax-advantaged savings vehicle for individuals with disabilities. Previously, this option was temporary. Now, families have ongoing flexibility to redirect education savings toward long-term care and quality-of-life expenses if a child doesn't pursue traditional education. What This Might Mean for Your FamilyThese changes are designed to make 529 plans more versatile than ever before. A 529 might be worth evaluating whether you're saving for a private elementary school, a vocational certification, or a four-year degree:
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Investors should consider the investment objectives, risks, charges and expenses associated with municipal fund securities before investing. This information is found in the issuer's official statement and should be read carefully before investing. Investors should also consider whether the investor’s or beneficiary’s home state offers any state tax or other benefits available only from that state’s 529 Plan. Any state-based benefit should be one of many appropriately weighted factors in making an investment decision. The investor should consult their financial or tax advisor before investment in any state's 529 Plan.
Converting from a traditional IRA to a Roth IRA is a taxable event. A Roth IRA offers tax free withdrawals on taxable contributions. To qualify for the tax-free and penalty-free withdrawal or earnings, a Roth IRA must be in place for at least five tax years, and the distribution must take place after age 59 ½ or due to death, disability, or a first-time home purchase (up to a $10,000 lifetime maximum). Depending on state law, Roth IRA distributions may be subject to state taxes.
Disclosure:
This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite is not affiliated with the named broker-dealer, state- or SEC-registered investment advisory firm.