Recent changes under the One Big Beautiful Bill Act expanded how 529 plans can be used starting in 2026. Here’s a brief overview of what changed.
Key Updates
- The annual federal limit for qualified K-12 withdrawals increased from $10,000 to $20,000 per beneficiary.
- Qualified K-12 expenses now generally include more than just tuition, such as curriculum materials, books, tutoring, certain testing fees, dual enrollment, and some educational therapies.
- 529 funds may also be used for certain post-secondary credentialing and vocational or trade program costs.
State tax treatment can differ from federal rules, so Minnesota residents should confirm details with their specific plan.
Contributions and Gifting
There is no federal annual contribution limit. Contributions are treated as gifts:
- 2026 annual gift tax exclusion is $19,000 per donor per recipient ($38,000 for a married couple using gift-splitting).
- A five-year “superfunding” election allows up to $95,000 (single) or $190,000 (married couple) in one year under certain conditions.
Other Flexibility
Unused 529 funds may, in limited cases, be rolled into a Roth IRA for the beneficiary (lifetime limit of $35,000, subject to account age and other rules). Up to $10,000 lifetime may also be used for student loan repayment.
What to Consider
Families may want to review whether current 529 balances and contribution strategies still align with their education plans, and how the new rules interact with state taxes and overall financial goals.
This article is for general informational purposes only and is not personalized advice. Strategic Financial Group does not provide tax or legal advice. Consult your own qualified professionals regarding your specific situation. Investing involves risk, including possible loss of principal.
References
- Internal Revenue Code §529 (as amended by the One Big Beautiful Bill Act, Public Law 119-21)
- IRS Revenue Procedure 2025-32 (annual gift tax exclusion for 2026)
- IRS Newsroom: Tax inflation adjustments for tax year 2026