529 plans received several important updates for 2026. The annual limit for qualified K-12 withdrawals increased to $20,000 per beneficiary, eligible K-12 expense categories expanded, and certain postsecondary credentialing costs can now qualify. Here is what families should know before contributing or withdrawing money.
What is a 529 plan?
A 529 plan is a tax-advantaged account designed for education expenses. Contributions are not deductible on your federal return, but earnings can grow tax-free and qualified withdrawals are generally free from federal income tax. Many states also offer a deduction or credit for contributions, subject to their own rules.
What changed for 529 plans in 2026?
The K-12 withdrawal limit increased to $20,000
For tax years beginning after December 31, 2025, the annual limit for qualified K-12 withdrawals increased from $10,000 to $20,000 per beneficiary across all of that beneficiary’s 529 accounts. The limit applies to total withdrawals, not separately to each account.
More K-12 expenses may qualify
Federal rules now recognize more than tuition for eligible elementary and secondary education. Qualified K-12 expenses can include curriculum and instructional materials, books, certain tutoring, standardized and admissions-test fees, dual-enrollment fees, and eligible therapies for students with disabilities. State tax treatment may differ, so check your state’s rules before taking a distribution.
Certain credentialing expenses can qualify
Some postsecondary credentialing expenses may now qualify, including certain tuition, fees, books, supplies, equipment, and testing costs associated with eligible programs. Confirm that the program and expense meet federal requirements before withdrawing funds.
The annual gift-tax exclusion remains $19,000
There is no single IRS annual contribution cap for every 529 plan, but contributions are treated as gifts. In 2026, the federal annual gift-tax exclusion is $19,000 per donor, per beneficiary, or potentially $38,000 when spouses properly elect to split gifts. A contribution above the exclusion does not automatically create gift tax, but it can require Form 709 and may use part of the donor’s lifetime exemption.
Five-year contribution averaging can front-load savings
A special election can treat a large 529 contribution as made evenly over five years. Based on the $19,000 annual exclusion, that can allow up to $95,000 from one donor—or $190,000 from a married couple when the applicable requirements are satisfied—to be spread across five years. Additional gifts to the beneficiary during that period can affect the calculation, and Form 709 is generally required to make the election.
State aggregate limits still apply
Each 529 program sets an aggregate account limit intended to cover qualified education expenses. Once the applicable limit is reached, the plan may stop accepting contributions even though the balance can continue to change with investment performance. Check the current disclosure document for the specific plan.
What counts as a qualified 529 expense?
For eligible higher education, qualified expenses generally include tuition, required fees, books, supplies, equipment, certain computer and internet costs, and limited room and board for students enrolled at least half-time. Federal rules also cover certain registered-apprenticeship costs, limited student-loan repayments, eligible K-12 expenses, and certain postsecondary credentialing expenses.
Nonqualified withdrawals generally trigger ordinary income tax and a 10% additional federal tax on the earnings portion, although exceptions can apply. Keep receipts and match withdrawals to qualified expenses incurred in the same tax year.
How to compare 529 plans across states
You generally are not required to use your home state’s plan. Compare any state tax deduction or credit with the plan’s fees, investment options, age-based portfolios, contribution limits, and withdrawal rules. A home-state benefit can be valuable, but it should be weighed against long-term costs and flexibility.
Build a 529 strategy that fits your family
- Start with the goal and timeline. Estimate when the money will be needed and how much of the expected cost you want the account to cover.
- Automate manageable contributions. A recurring amount can make saving more consistent. Use our savings goal calculator to test monthly targets.
- Match risk to the time horizon. Age-based portfolios typically become more conservative as the beneficiary approaches enrollment.
- Protect retirement first. Avoid sacrificing essential retirement savings or emergency reserves to overfund education.
- Review annually. Revisit the beneficiary, investment allocation, expected aid, account balance, and state tax rules.
What if the beneficiary does not attend college?
A 529 account can remain useful. You may be able to change the beneficiary to an eligible family member, pay for qualifying trade-school, apprenticeship, or credentialing expenses, make limited student-loan payments, or preserve the account for future education.
Eligible unused funds may also be rolled to a Roth IRA for the beneficiary, subject to federal requirements. Among other restrictions, the 529 account generally must have been open for at least 15 years, recent contributions and earnings are excluded, annual Roth IRA contribution limits apply, and the lifetime rollover limit is $35,000. Confirm current IRS rules before initiating a rollover.
Frequently asked questions
How much can you withdraw from a 529 plan for K-12 expenses in 2026?
Up to $20,000 per beneficiary per year can qualify federally across all of the beneficiary’s 529 accounts. Eligible expense categories now extend beyond tuition, but state treatment can differ.
How much can you contribute to a 529 plan in 2026?
The IRS does not impose one universal annual contribution ceiling for all plans. Plan-level aggregate limits apply, and contributions above the $19,000 annual gift-tax exclusion per donor and beneficiary may require gift-tax reporting.
Does contributing more than $19,000 mean you owe gift tax?
Not necessarily. The excess may require Form 709 and may reduce the donor’s remaining lifetime gift and estate tax exemption. The five-year election can spread an eligible 529 contribution across five years for gift-tax purposes.
Can unused 529 money be moved to a Roth IRA?
Potentially. The rollover must satisfy federal requirements, including the 15-year account-age rule, annual contribution limits, the $35,000 lifetime limit, and restrictions on recent contributions and earnings.
Bottom line
The 2026 changes make 529 plans useful for a broader range of education costs, but federal and state treatment can differ. Before making a large contribution or withdrawal, review the plan’s current disclosure document and confirm how the transaction will be treated for federal and state tax purposes.
Help younger family members understand the goal behind the account with our guide to money management for teens, and explore more resources in our family finance hub.
This article is for general educational purposes only and is not personalized financial, legal, investment, or tax advice. Federal and state rules can change and individual circumstances vary. Consider consulting a qualified tax or financial professional before making a large 529 contribution or withdrawal.
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