529 plans now cover more school costs and work credentials

Before the change, K-12 use was limited to tuition. IRS Topic 313 now lists these expenses for students at public, private or religious elementary and secondary schools:

• Tuition
• Curriculum and curricular materials, and books or other instructional materials
• Tutoring or educational classes outside the home, including at a tutoring facility
• Fees for nationally standardized achievement tests, advanced placement exams and college admission exams
• Fees for dual enrollment in an institution of higher education
• Educational therapies for students with disabilities from a licensed or accredited provider

Topic 313 gives the K-12 limit as $20,000 per year across all of the beneficiary’s plans, with a $10,000 limit before December 31, 2025. The limit is per beneficiary, so two grandparents funding separate plans for the same child share one cap.

Qualified expenses now include qualified postsecondary credentialing expenses, such as tuition, books, supplies or equipment required for enrollment in a recognized credential program. IRS training material adds that continuing education and exam fees to keep a credential current also qualify. That opens 529 money to trade licenses and professional certifications, not only degrees.

Form 1099-Q reports the distribution but not what it paid for. Ask clients for receipts that match each withdrawal to a qualifying expense in the same year, and confirm K-12 withdrawals stayed under the yearly limit across every plan for that child.

States decide for themselves whether to follow federal changes to qualified expenses, so check the client’s state rules before advising on a new type of expense.