College savers may soon be able to use 529 plans to pay for a wider range of education expenses under the One Big Beautiful Bill Act, which passed in the U.S. House of Representatives in May.

The legislation —now before the Senate — details provisions that would greatly expand the list of expenses eligible for tax-free withdrawals from 529 plans to include many costs for students in K-12 elementary and high schools, as well as those being homeschooled or seeking non-degree credentials and licenses. The bill also includes changes to health savings accounts (HSAs) which would expand access to an additional 20 million people if signed into law.

The 411 on 529s

529 plans are popular savings vehicles for families to set aside money for a beneficiary’s future education expenses, with around $508 billion currently in the accounts nationwide.¹ Upfront contributions don’t receive a federal income tax deduction (and may or may not receive a state tax deduction), but a benefit for savers is that earnings within the plan can grow tax-free and are not taxed upon withdrawal — as long as the funds are used for qualified education expenses.²

Empower research shows that funding children’s education is the number one financial goal of “DEWKs” — adults who are Dually-Employed With Kids. With average annual college tuition ranging anywhere from $29,910 for in-state public schools to as much as $62,990 for private universities, saving early and often through a 529 plan can help parents take advantage of compound earnings or compound interest as they fund their child’s education.³

While there's no federal limit on annual 529 plan contributions, individuals can contribute up to $19,000 per beneficiary in 2025 without triggering gift tax implications, or $38,000 for married couples filing jointly.⁴ States do set maximum limits, which range from $235,000 to $575,000.⁵

Changes to 529 plans in recent years

529 plans have undergone a wave of expansion in recent years. In 2019, the SECURE Act broadened the qualified expenses for which 529 funds can be used, adding apprenticeships and up to $10,000 in student loan repayments.⁶ The SECURE 2.0 Act of 2022 added another major benefit: Since 2024, unused 529 plan assets can be rolled over into a Roth IRA, allowing savers to repurpose overfunded 529 plan savings to fund their retirement. 

For the 529 rollover to be tax-free, it must be paid through a direct trustee-to-trustee transfer, is subject to the Roth IRA annual contribution limit and a $35,000 lifetime limit, and must be distributed from an account that has been open for at least 15 years.⁷

Read more: College savings can help fund your retirement

What 529 plans could cover under the new bill

If passed as currently written, the new tax and spending bill would provide even greater flexibility for 529 beneficiaries. 529 funds could be used to pay for expenses such as:⁸

On-the-job training and continuing education

Programs eligible for tax-free 529 withdrawals would include on-the-job training and continuing professional education required for attorneys, electricians, cosmetologists, and others. Such programs would have to lead to a recognized post-high school license or credential to be eligible for tax-free 529 withdrawals. As a result, the legislation could make 529s a more flexible tool for lifelong learning and career development, not just college savings.

Standardized testing fees

The cost of taking the requisite tests to get into college would also be covered under the 529 expansion. The exams can set students back $68 for the SAT and $65 for the ACT, plus additional fees to cancel or change a scheduled date or add-on an ACT writing section.^9,10 Some industry experts say even the cost of SAT or ACT test prep — which can cost parents as much as $500 an hour — could become eligible.^11,12

Read more: How paying for higher ed can start long before getting in

Tutoring

Under current law, tutoring is generally not considered a qualified education expense for 529 plans. The new bill would allow 529 funds to be used to pay tuition for any tutoring or educational classes taken outside the home.

Curriculum materials, books, and digital instruction materials

Newly covered would also be the cost of curriculum materials, books, and other physical or digital instructional materials which can easily stack up out-of-pocket costs for parents.

Homeschooling costs

Homeschooling has increased 36% in recent years, with more than 3 million homeschool students currently enrolled in the U.S.¹³ Current federal law doesn’t allow for 529 plan distributions to be used for homeschooled students, but the new bill proposes expanding the definition of qualified expenses to include a wide range of homeschool-related costs, which are not currently covered under federal law.¹⁴ With the average cost of homeschooling totaling $1,295 per year for elementary students and $1,636 per year for middle or high school students, the shift could equate to big savings for parents.¹⁵

Dual enrollment fees

The proposed expansion also includes allowing funds to be used for dual enrollment fees for college courses taken in high school. This means that if a high school student is taking college courses, the expenses associated with those courses, like tuition and fees, could potentially be covered by a 529 plan.

Educational therapy

Families could potentially use 529 funds to pay for educational therapy, aiding students with disabilities in accessing customized learning experiences.