A new school year is a great opportunity to revisit 529 plans — whether for your children, grandchildren, or other loved ones. Here are six facts we want you to know from advising our clients and saving for our own children's education.
-
Money invested in a 529 can grow tax-free. You deposit after-tax dollars into a 529 account and there is generally no tax when withdrawals are later used for qualified educational expenses. If you make a withdrawal that does not meet those requirements, taxes and penalties can apply to the earnings in the account. However, you are not taxed again on your original contribution.
-
You can change the beneficiary to another family member. If one child no longer needs the money, you can change the beneficiary to another eligible family member, such as a sibling, cousin, grandchild, or even yourself.
-
529 accounts can be used before college. Federal law now allows up to $20,000 per student each year for certain K-12 tuition and other qualifying expenses, which can include tutoring and standardized test fees.*
-
529 accounts can also go toward retirement savings. Up to $35,000 over a beneficiary's lifetime can be rolled from a 529 into the beneficiary's Roth IRA, subject to the Roth IRA contribution limit and other requirements, including a 15-year account history.*
-
You don't have to use a 529 account in your state. More than 30 states offer a tax deduction or tax credit for 529 contributions. If you qualify for a state tax benefit, that can be an important factor in choosing a plan. If you're in a state without a 529 tax benefit (e.g., California, North Carolina) or with no state income tax, you can generally choose a plan based on its fees, investment options, and other features.
-
You can contribute more than you may realize. Because 529 contributions are treated as gifts, they qualify for the annual gift tax exclusion. That means $19,000 per giver in 2026, or $38,000 for a married couple, per beneficiary. The IRS also allows "superfunding," where a lump sum of up to five years' worth of exclusions can be contributed at once. Combined with the flexibilities above, 529s could be a useful part of your estate plan and worth discussing with a CPA or estate attorney.
Importantly, not all states have adopted the newer federal rules for K-12 expenses or 529-to-Roth rollovers. That means a distribution for those uses that receives favorable tax treatment under federal law may still be subject to additional state taxes. That is currently the case in California, New York, and several other states.
This communication is for general informational purposes only and does not constitute tax, legal, or investment advice, nor does it create an advisory relationship. Information is believed to be reliable but not guaranteed, and was last verified September 8, 2026. Please consult your own tax, legal, or financial advisor before making any decisions.