🎓 529 Plans Just Got a Major Upgrade

🟦✴️ NETWORTH HABITS by John Lepore, CPA
Financial Wisdom for Building Generational Wealth

Key Highlights from the "One Big Beautiful Bill Act" (OBBBA) – Effective July 4, 2025

Recent legislation has expanded the power and flexibility of 529 education savings plans. These changes give families more options to fund K–12, higher education, and even career training. Here’s a breakdown of what’s new:

1. K–12 Withdrawal Limit Increased

• Families can now use 529 funds for a wider range of non-tuition expenses like books, online courses, homeschooling materials, and more.

• Note: Some states may need to update their tax codes to align with these federal changes.

2. Broader Definition of K–12 Expenses

• Families can now use 529 funds for a wider range of non-tuition expenses like books, online courses, homeschooling materials, and more.

• Note: Some states may need to update their tax codes to align with these federal changes.

3. Career Training & Continuing Education Now Eligible

• 529 plans now cover programs under the Workforce Innovation and Opportunity Act (WIOA).

• Includes tuition, books, fees, and testing for approved career and vocational training programs.

4. 529-to-Roth IRA Rollovers Still Allowed

• You can roll over up to $35,000 (lifetime cap) from a 529 to a Roth IRA for the beneficiary—tax and penalty free.

• Key rules:
  1. Account must be open for at least 15 years

  2. Contributions made in the last 5 years can’t be rolled over

  3. Annual Roth limits apply (2025: $7,000; $8,000 if age 50+)

  4. Beneficiary must have earned income

  5. Roth IRA income limits do not apply to these rollovers

5. ABLE Account Features Made Permanent

For individuals with disabilities:

• 529-to-ABLE rollovers remain in place

• "ABLE to Work" contribution enhancements extended

• Contributions to ABLE accounts can now qualify for the Saver’s Credit
  These accounts help people save for disability-related expenses without affecting benefits like SSI or Medicaid.

6. New: MAGA “Kids” Accounts Launch in 2026

(Separate from 529s, but relevant for family planning)

• Available to children born between Jan 1, 2025 and Jan 1, 2029

• $1,000 federal seed deposit per child

• $5,000 max annual contributions

• Tax-deferred growth

• Preferential tax treatment if used for education, first home, or starting a business

✅ Takeaway:

529 plans now cover more than just college — from K–12 and vocational training to Roth IRA rollovers and disability savings. If you're saving for a child’s future, now’s a great time to revisit your strategy.

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📧 John Lepore, CPA