- 529 plans are no longer just for college degrees. New federal rules allow withdrawal of 529 plans for credentials, licensure exams, and continuing education related to professions.
- Eligibility expands from kindergarten through 12th grade, with higher limits. Tuition and fees and a broader range of school-related costs are eligible, with the annual maximum rising to $20,000 in 2026.
- State rules still matter. Federal eligibility has expanded, but state tax treatment can vary — families need to check the exact details of their plan.
For decades, 529 college savings plans have been built around a narrow idea of education: enroll in an eligible college, pay tuition, buy books, and (if you attend at least half-time) cover room and board.
Gradual changes over the years have loosened this framework, allowing limited K-12 tuition and small student loan repayments. However, the system remained based on degree programs at traditional institutions.
That changed with the passage of the One Big Beautiful Bill Act on July 4, 2025. The law expanded the federal definition of “qualified education expenses” to 529 plans once again, opening the door to a much wider range of learning paths.
The result is a shift that aligns tax-advantaged savings with how education and work actually work today, where credentials, licenses, and continuing education are often as important as degrees.
529 Plan Expansion: What Has Changed for Professional Related Expenses?
Under new federal rules, qualified withdrawals made after July 4, 2025, can cover a broader range of post-secondary and professional expenses. The expansion goes beyond degree or certificate programs to include credentials and training listed in the appropriate federal or state directories. This is important because many fast-growing fields (health care, finance, construction, technology) require continuing education and periodic testing rather than a one-time degree.
Eligible expenses now include:
- Post-secondary accreditation And training costseven if the program does not result in a traditional degree, as long as it appears on the recognized federal or state lists.
- Continuing Education (CE) Required to maintain professional licensing or credentialssuch as training courses for accountants, nurses, real estate agents, financial advisors, or other licensed professionals.
- Testing, licensing and certification fees Associated with accreditation programs.
- Books, supplies and equipment required Which is an integral part of completing certification or licensing requirements.
The practical effect is that a 529 plan can now serve as an account for lifelong learning. A student can use it to earn a short-term credential after high school, rely on it again to take the licensing exam in their 20s, and then use the remaining funds later to meet continuing education requirements mid-career.
K-12 education has higher and higher limits
The law also builds on previous changes that affected K-12 education. At the federal level, K-12 public or private school tuition qualifies as a 529 expense, with an annual maximum that increases over time. The limit remains $10,000 annually for the year 2025then rises to $20,000 per year starting in 2026.
The range of eligible K-12 expenses also expands. Families can use 529 boxes to:
The overall annual cap still applies to these categories. In other words, tuition plus private lessons and books together cannot exceed the annual limit.
There is an important caveat: While these expenses are eligible at the federal level, State rules may vary. Some states fully meet the federal definitions for tax purposes; Others don’t. A federally tax-free withdrawal could still result in a state income tax levy or a clawback of previous state tax deductions.
Review the College Investor’s 529 Plan Guide by state, select your state, and see what rules apply.
Why this is important for families
For families saving for education, the expansion changes the risk profile of a 529 plan. Previously, families worried about “oversaving” if a child skipped college or received a scholarship, and could face a tax penalty. With the broader definition of eligible expenses, unused funds have more realistic outlets.
For workers, especially those in licensed or regulated professions, this change could lower the after-tax cost of remaining certified. Continuing education is not optional in many fields; It is a condition of employment. The ability to pay these expenses with tax-free growth rather than after-tax dollars can free up cash flow elsewhere in the household budget.
The changes may also benefit students pursuing nontraditional paths. Short-term training programs, industry credentials, and licensing exams often cost much less than a four-year degree but provide strong earnings returns. Until now, families have not been able to reliably use 529 funds for these options. The new rules recognize that education-to-work pathways no longer operate through a single model.
What to watch next
There are still several open questions. States may update their tax matching rules in response to federal expansion, creating a patchwork during the transition period. Employers can also reconsider their education benefits strategies, coordinating tuition assistance or reimbursement programs with employee-owned 529 accounts.
Families with existing balances may want to reconsider their beneficiary designations and long-term plans. A 529 originally opened for a child’s college education can now reasonably support the child’s own vocational training—or can be reassigned within a family to meet similar needs.
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