A 529 plan is a tax-advantaged savings account designed to help families pay for education costs. These tax-advantaged accounts, are designed to help families cover education costs while also offering unique tax benefits.
Whether you’re a parent, grandparent, or even saving for your own education, understanding the latest 529 plan rules in 2025 can help you maximize their value.
• Tax-free growth: Investments inside a 529 plan grow tax-deferred and can be withdrawn tax-free if used for qualified education expenses.
• State tax benefits: Many states offer tax deductions or credits for contributions. Rules vary by state, so check your local program.
• High contribution limits: Unlike IRAs or 401(k) contribution limits are very high (often $300,000+ per beneficiary, dependingon the state).
Funds must be used for qualified education expenses to keep tax-free treatment. These include:
• College tuition, fees, books, computers, and supplies
• Room & Board
• Up to $10,000 per year for K–12 tuition
• Up to $10,000 lifetime for student loan repayment(per beneficiary)
• Certain apprenticeship programs
If funds are used for non-qualified expenses, earnings are subject to income tax plus a 10% penalty.
Thanks to the SECURE Act 2.0, unused 529 funds can now be rolled into a Roth IRA for the beneficiary, subject to IRS limits:
• The 529 must be open for at least 15 years.
• Beneficiary’s annual Roth contribution limit applies (e.g.,$7,000 in 2024).
• Must have earned income of contribution amount
• Lifetime rollover cap: $35,000.
• This feature helps reduce the fear of “overfunding” a 529 plan.
• Tax-free growth + state tax benefits (benefits available in some states)
• Flexible use across colleges and now K-12 schools
• Roth IRA rollovers for beneficiaries ($35,000 life time limit)
• Able to shift unused 529 Plan funds to another child in your family
• 529 Plans are a great option for you and your family to geta start on saving for your child’s future education expenses!
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