529 College Savings Plan to Minimize Taxes

A 529 college savings plan* is a popular way for families to save for higher education expenses while enjoying significant tax advantages. Contributions grow tax-free when used for qualified education costs, such as tuition, books, and room and board. To maximize these benefits, consider contributing early and regularly, allowing your investments more time to grow.

Changes under the One Big Beautiful Bill Act (OBBBA) make 529 plans more flexible than ever for covering college and other educational needs. When the time comes, you can take tax-free withdrawals to pay for qualified education expenses. Additionally, up to $10,000 (lifetime limit per beneficiary) from these plans can be used to pay qualified student loans for the beneficiary and any siblings.

Starting in 2026, families can withdraw up to $20,000 per year per beneficiary from 529 plans for qualified K- 12 expenses—up from the previous annual limit of $10,000. Qualified expenses now include not only tuition but also curriculum and instructional materials (such as books or online courses), tutoring by licensed or expert instructors, dual-enrollment fees, standardized test (e. g., SAT/ACT) fees, and educational therapies for students with disabilities.

Distributions may now be used tax-free for training registered under the Workforce Innovation and Opportunity Act, apprenticeships, and state-licensed certifications (specific qualifications may apply). Qualified expenses include tuition, fees, books, supplies, and exam fees in career training and continuing education.

A key to minimizing taxes is to take advantage of state tax deductions or credits offered for 529 contributions. Many states provide incentives that reduce your state tax bill dollar-for-dollar up to a certain limit. Make sure to check your state's rules to maximize these benefits.

*Certain requirements may apply. Before investing, read the program offering statement and consider the investment objectives, risks, charges, and expenses. These plans are not guaranteed by any state or federal agency. If you are not a taxpayer of the state offering the plan, consider before investing whether you or the designated beneficiary's home state offers any state tax or other benefits that are only available for investments in that state's qualified tuition program.