THE BASICS
1. What a 529 plan is
- A state-run education savings planOfficially a qualified tuition program
- Earnings grow tax freeWhile the money stays in the account
- Tax-free withdrawalsWhen used for qualified higher education expenses
Source: IRS Topic 313.
NEW IN 2026
2. Bigger K-12 limit
- Up to $20,000 a yearFor elementary or secondary school expenses
- It was $10,000Through the end of 2025
Source: IRS Topic 313.
THE CATCHES
3. Know these first
- No federal deductionContributions aren't deductible on your federal return
- Non-qualified withdrawalsPart of the earnings becomes taxable
- Plans differ by stateCompare fees and any state tax perks
Source: IRS Topic 313.
LEFTOVER MONEY?
4. The Roth IRA rollover
- Roll it to the beneficiary's Roth IRAAs a direct trustee-to-trustee transfer
- The account must be 15+ years oldStart early if you want this option
- Up to $35,000 over a lifetimeWithin the yearly Roth IRA limit
Source: IRS Topic 313.
GETTING STARTED
5. Simple first steps
- Look at your own state's plan first
- Compare fees between plans
- Automate a small monthly amount
- Ask family to gift to the account
Educational only, not financial advice. Talk to a fee-only fiduciary or CPA about your situation.
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