529 Plans in 2025: A Smart Way to Save for Education

When it comes to saving for education, 529 plans remain one of the most powerful and flexible tools available. While traditionally thought of as “college savings accounts,” recent updates have expanded how these tax-advantaged plans can be used, not just for tuition, but for a wide range of educational and financial goals. Whether you’re a parent, grandparent, or simply someone looking to support a future scholar, here’s what you need to know about 529 plans in 2025.  

 

Contributions: Treated as Gifts  

 

Contributions to 529 plans are considered gifts to the beneficiary, which means they’re subject to the annual gift tax exclusion. In 2025, that exclusion is $19,000 per beneficiary.  

Here’s where it gets even more flexible: you can “superfund” a 529 plan by front-loading up to five years’ worth of contributions. That means in 2025, you could deposit $95,000 at once ($19,000 × 5). This allows families to jumpstart savings and maximize long-term compounding.  

It’s important to note that contributions are not deductible on your federal tax return, but many states offer tax deductions or credits for residents who invest in their home-state plan.  

 

Tax-Free Withdrawals for Qualified Expenses  

 

Perhaps the biggest benefit of 529 plans is that investment growth and withdrawals are tax-free when used for qualified education expenses. These include:  

- Tuition  

- Room and board for at least half-time students  

- Required fees, books, and supplies  

- Computers, software, and internet access  

- Off campus housing

- Food and utilities

 

The coverage even extends to off-campus housing, though withdrawals for room and board can’t exceed the school’s published allowance.  

And it’s not just for traditional colleges anymore: funds can also be used for credentialing programs and certain apprenticeship expenses, giving savers much more flexibility.  

 

Expanded Use for K–12 Education

 

529 plans aren’t limited to higher education. Families can also use up to $10,000 per year, per beneficiary for private K–12 tuition (this rises to $20,000 starting in 2026).  

The recently passed “One Big Beautiful Bill” also expanded 529 usage. Eligible expenses now include:  

- Online coursework and curriculum materials  

- Standardized testing fees  

- Educational therapy for students with disabilities  

However, state tax rules differ. Some states don’t treat K–12 withdrawals as tax-free for state purposes, so always check your local rules.

 

What If the Beneficiary Doesn’t Use the Money?  

 

Worried about overfunding a 529? Don’t be. The rules now provide several options for unused funds, including:  

- Paying student loans: Up to $10,000 per beneficiary can be used to pay down federal or private student loan debt. (Note: this is a lifetime limit.)  

- Changing beneficiaries: You can transfer the money to another qualifying family member.  

- Rolling over to an ABLE account: This supports beneficiaries with disabilities while preserving tax benefits.  

- Rollover to a Roth IRA: Since 2024, beneficiaries can convert up to $35,000 lifetime from a 529 to a Roth IRA, provided the 529 has been open at least 15 years. Annual rollover limits are tied to IRA contribution caps ($7,000 for 2025).

 

The Bottom Line  

 

529 plans are no longer just college savings vehicles, they’ve evolved into versatile financial planning tools that can support everything from K–12 tuition to apprenticeships, debt repayment, and even retirement savings.  

 

With tax advantages, flexible rollover options, and long-term growth potential, 529s remain one of the smartest ways to invest in education and a child’s future!!