Key Takeaways

• The K-12 annual distribution limit doubled to $20,000 per beneficiary starting in 2026
• K-12 529 distributions can now be used for expenses beyond tuition, like tutoring, test prep, educational therapy, and curriculum materials.
• 529 funds can now cover expenses for postsecondary credentialing programs, not just traditional four-year programs.
• State rules don’t automatically follow federal law. Confirm how your state treats these changes with a tax professional before acting.

The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, brought a wave of tax changes. Permanent tax brackets, updated standard deductions, and itemized deduction modifications got the attention. But buried inside the legislation are meaningful updates to 529 savings plans that are worth a close look, particularly if you’re planning to fund an elite education for your children.

Here’s a breakdown of what changed with 529s starting in 2026, and what it could mean for your planning.

What Is a 529 Plan?

A 529 plan is a tax-advantaged savings account designed specifically for education expenses. Contributions grow tax-deferred, and withdrawals used for qualifying education expenses are free from federal income taxes. States often offer additional tax deductions for contributions. The accounts are owned by a parent or grandparent, with a named beneficiary (typically the child whose education you’re funding).

Key Changes to 529 Plans in 2026

The K-12 Distribution Cap Doubled

Under previous rules, families could only withdraw up to $10,000 per beneficiary per year from a 529 plan for K-12 expenses, and that was only for tuition. Starting in 2026, that annual cap has increased to $20,000 per beneficiary.

That’s a significant shift for families sending children to private elementary or secondary schools, where annual tuition can easily approach or exceed that threshold.

What’s more, the list of qualifying K-12 expenses has been significantly expanded beyond tuition. Distributions can now be used for:

• Curriculum materials and textbooks
• Tutoring expenses
• Educational therapy costs
• Standardized test fees (think SAT, ACT, and subject tests)
• Dual enrollment fees for postsecondary programs

For families spending $40,000–$60,000 or more annually on private school, the $20,000 limit still won’t cover the full bill, but it meaningfully increases the tax-free portion that can flow through the account each year.

Note: These changes apply at the federal level. Not all states have adopted OBBBA’s updates to 529 rules. Contact your tax professional directly to confirm how your state treats K-12 withdrawals before putting this strategy into motion.

New Qualifying Uses for Postsecondary Credentials

The OBBBA also expanded what 529 funds can cover at the postsecondary level. Beyond traditional four-year college expenses, 529 plans can now be used for tuition, fees, books, and exam fees tied to postsecondary credentialing programs (such as the Certified Nursing Assistant certification, cosmetology licenses, apprenticeships, and the Automotive Service Excellence certificate), including fees to maintain those credentials over time.

For children who pursue professional certifications, trade credentials, or other non-traditional educational paths alongside or instead of a traditional college degree, this opens up new flexibility that didn’t exist before.

Who Benefits Most From These Changes?

Families sending children through private K-12 schools stand to benefit immediately from the doubled distribution limit and expanded list of qualifying expenses. The ability to pull $20,000 per year tax-free, covering not just tuition but tutoring, test prep, and curriculum materials, makes the 529 a more useful vehicle for the full arc of a child’s education, not just college.

For parents planning to fund an elite undergraduate education and potentially graduate school beyond that, the accelerated gifting strategy may make sense if you have a large cash position and want to get money growing inside the tax-advantaged structure as early as possible. With private university costs potentially reaching $90,000–$100,000 per year by the time today’s young children enroll, front-loading early gives that money the most time to grow.

Accelerated Gifting: Fund a 529 in One Large Contribution

For high-income families sitting on significant cash reserves, accelerated gifting (sometimes called superfunding) is one of the most efficient ways to get money into a 529 quickly.

The IRS allows you to front-load five years’ worth of annual gift tax exclusions into a 529 plan in a single year without triggering federal gift tax. With the current annual exclusion at $19,000 per person, that means:

• Single contributor: Up to $95,000 per beneficiary in a single contribution
• Married couples using gift-splitting: Up to $190,000 per beneficiary in a single contribution

If you contribute additional funds to that same beneficiary’s 529 during the five-year period, those amounts may be subject to federal gift tax. You’d also need to file a gift tax return (Form 709) in the year the accelerated gift is made.

To illustrate the difference between the two approaches, here’s what investing the same total amount — $120,000 — could look like over time, assuming 7.4% annual growth.¹ One path spreads $12,000 per year over ten years; the other puts the full $120,000 in upfront:

The difference at year 13, a reasonable proxy for when a child starting kindergarten today reaches college, is roughly $84,000. That gap reflects the additional years of tax-deferred growth the upfront contribution has access to, and it can go a long way toward covering tuition at a top-tier university.

Timing tip: If you’re later in the calendar year, you could make a $38,000 contribution in December ($19,000 if a single contributor) and then make the full accelerated gift in January of the following year. Since those contributions fall in separate tax years, you’re not doubling up on the same year’s exclusion — even though the two contributions are only a month apart. This approach maximizes the dollars going into the account without adverse gift tax consequences.

What Happens If You Over-Fund a 529?

Over-funding is a real concern for high earners who contribute aggressively. If your child receives substantial scholarships, attends a lower-cost school, or decides not to pursue a traditional college path, you could end up with significant leftover funds.

Non-educational withdrawals from a 529 are subject to ordinary income taxes plus a 10% penalty on the earnings portion. That’s a costly outcome worth planning around.

There are several strategies worth considering when excess funds remain:

1. Roll excess funds into a Roth IRA. Under the SECURE 2.0 Act (effective 2024), unused 529 funds can be rolled tax- and penalty-free into the beneficiary’s Roth IRA (up to $35,000 lifetime). The rollover counts against the beneficiary’s annual Roth IRA contribution limit and is reduced by any other IRA contributions made in that tax year. The beneficiary must also have earned income in the year of the rollover at least equal to the amount being rolled over.

There are two important requirements before attempting this: the 529 account must have been open for at least 15 years, and the funds being rolled over must have been in the plan for at least 5 years. If the beneficiary on the account changes, the 15-year clock may reset, so this isn’t a strategy to rush.

2. Hold funds for graduate or professional school. An Ivy League or top-tier undergraduate degree is expensive, but graduate school, law school, or medical school can be equally so. Keeping remaining funds available for advanced education is often the simplest path forward.

3. Transfer funds to another family member. 529 funds can be transferred tax-free to a wide range of relatives: spouses, children, siblings, grandchildren, nieces and nephews, first cousins, in-laws, aunts, and uncles. If one beneficiary’s account holds excess funds, those dollars can shift to support another family member’s education costs.

A Few Things to Confirm Before Acting

529 rules involve federal and state legislation that don’t always align. Before implementing any of these strategies, it’s important to confirm:

• How your specific state treats 529 distributions for K-12 expenses under OBBBA
• Whether your state offers a tax deduction for 529 contributions (New York, for example, offers up to $10,000 for married filing jointly)
• Whether a Roth IRA rollover makes sense given the beneficiary’s income, existing IRA contributions, and the 15-year account seasoning requirement

Range’s Instant Education Plans allow members to analyze different education scenarios to select the best path forward for their goals and situation. Range runs projections across different contribution levels, time horizons, and withdrawal strategies to help members determine the approach that fits their family’s situation.

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Frequently Asked Questions

Can I use 529 funds for private school tuition starting in kindergarten?

Yes. Under OBBBA, 529 plans can be used for K-12 expenses at private, public, or religious schools. Starting in 2026, the annual distribution limit for K-12 costs is $20,000 per beneficiary — up from the prior $10,000 cap. Qualifying expenses now extend well beyond tuition to include tutoring, educational therapy, standardized test-prep fees, curriculum materials, and dual-enrollment fees for postsecondary programs. State tax treatment of these withdrawals varies, so confirm your state’s rules with a tax professional before withdrawing.

What happens if my child gets a full scholarship and we don’t need the 529 funds?

You have several options. You can roll up to $35,000 lifetime into the beneficiary’s Roth IRA tax- and penalty-free (subject to annual contribution limits, earned income requirements, and the 15-year account seasoning rule). You can hold the funds for potential graduate or professional school. Or you can transfer the balance to another qualifying family member — including siblings, cousins, in-laws, or grandchildren — for their education costs.

What is accelerated gifting, and is it right for every family?

Accelerated gifting lets you contribute up to five years’ worth of annual gift tax exclusions into a 529 in a single year — currently up to $95,000 per child for individuals, or $190,000 per child for married couples using gift-splitting. It works well for families with significant cash reserves who want to grow a large sum in a tax-advantaged account as early as possible. The trade-off is that you generally can’t make additional gifts to that same beneficiary for the remainder of the five-year window without potential gift tax consequences, and you’ll need to file Form 709 in the year the gift is made.

Can I change the beneficiary on a 529 without losing the Roth IRA rollover option?

Changing the beneficiary may reset the 15-year clock required for a Roth IRA rollover. If a parent changes the beneficiary to themselves or another individual, it’s likely viewed as a means of circumventing income limits on direct Roth IRA contributions, which could nullify the rollover strategy entirely. Reach out to your financial planner directly before making any beneficiary changes if a future Roth rollover is part of your plan.

How much can a married couple contribute to a 529 each year without triggering gift tax?

Each spouse can give up to the annual exclusion amount — currently $19,000 — to each beneficiary per year, for a combined $38,000 per child annually between two spouses. Accelerated gifting scales up to $190,000 per child in a single year when spouses elect to gift-split, covering five years of contributions upfront.

Does my state follow the new federal 529 rules under OBBBA?

Not necessarily. While OBBBA’s changes apply at the federal level, states set their own rules around 529 plan deductions and qualified withdrawals. Some states have already adopted the federal changes; others haven’t. Range members can ask Rai, Range’s AI wealth advisor, to confirm how their state treats 529 distributions — particularly for K-12 expenses — before making withdrawals.²

What’s the difference between the OBBBA changes and the SECURE 2.0 Act changes to 529s?

OBBBA (enacted in 2025) expanded the qualifying uses and raised the distribution limit for K-12 expenses, and added postsecondary credentialing programs as a qualifying use. The SECURE 2.0 Act (effective 2024) introduced the ability to roll unused 529 funds into a Roth IRA — up to $35,000 lifetime. Both sets of changes are now in effect and can be used together as part of a broader education funding strategy.

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_Disclosures:

_{1 For illustrative purposes only. Not a guarantee of any future return or outcome.}

_{2 Please see Range Advisory’s ADV Part 2A for important risk disclosures and risks related to the use of AI. Recommendations depend on the accuracy and completeness of the information you provide to us. Recommendations based on incorrect or incomplete data may not be accurate.}

_{The information contained in this communication is for informational purposes only. This content may not be relied on in any manner as specific legal, tax, regulatory, or investment advice. While we strive to present accurate and timely content, tax laws and regulations are subject to change, and individual circumstances can vary.}

_{You should not rely solely on the information contained here when making decisions regarding your taxes or financial situation. We strongly recommend consulting with a certified tax professional, accountant, or legal advisor to address your specific needs and ensure compliance with applicable laws.}