Using 529 plans for K-12 education

529 Education Savings Plan federal rules allow for up to $10,000 per student in 2025 to be applied toward private elementary or secondary school education expenses, making a 529 plan for K-12 a flexible savings option.

As an example of how to use a 529 plan to pay for K-12 tuition, let’s say you open a 529 plan when your child is born. You make an initial deposit of $15,000 and monthly contributions of $396 through 12th grade. Assuming annual tuition costs of $10,000, a 5.5% school cost inflation rate and a 529 plan rate of return of 7.7%, your 529 plan would help cover 54% of your child’s total private K-12 tuition costs.

Which states allow 529 plans for K-12 tuition tax advantages?

One caveat to applying distributions towards K-12 education expenses is that not all states follow the federal law.

If your state doesn’t recognize K-12 expenses as “qualified,” withdrawing funds for this purpose could result in state tax penalties or impact your eligibility for state tax credits and deductions. There may also be state tax penalties for non-qualified distributions.

To navigate these rules, compare 529 plans based on their features and state-specific tax benefits. Consulting a tax professional can also help you develop the best strategy for your situation.

Which K-12 schools are eligible for 529 plans?

If you live in a state that follows the federal law, you can withdraw up to $10,000 per student in 2025 if they’re enrolled at a K-12 private or religious elementary or secondary school.

The One Big Beautiful Bill Act (OBBA) increases this amount to $20,000 per year/per student in 2026. The new law also expands the definition of “qualified expenses” for K-12 education use to include non-tuition costs, effective immediately in 2025 (again, this only applies to states that follow the federal law). These expenses may include:

• Books and curriculum materials
• Standardized testing fees
• Tutoring services (certain restrictions apply)
• Online education
• Enrollment in college courses taken during high school
• Certain educational therapies

You may also be able to use 529 funds for homeschooling expenses if you live in a state that recognizes homeschooling as a form of private schooling. 

529 plan rules for K-12 tuition and education expenses

Other than the federal withdrawal limits for K-12 education expenses, all the other 529 plan rules apply:

• Your annual contributions to a 529 plan are not tax deductible at a federal level.
• K-12 withdrawals beyond the annual limit, or withdrawals used for non-qualifying expenses, are subject to federal income tax and a 10% penalty.
• If contributions or any additional funds gifted toward a 529 plan exceed $19,000 ($38,000 for married couples filing jointly), which is the 2025 IRS gift tax exclusion, the surplus would be subject to the federal gift tax.
• As an option, you can choose to contribute a lump sum of up to $95,000 (or $190,000 for joint contribution) in 2025 and elect to have the contribution considered “spread” over five years. This essentially allows you to use five years of annual gift exclusions in one year. This larger gift wouldn’t be subject to the gift tax if the person who made the gift lives for the full five years. This feature can be an effective strategy for long-term estate and gift planning, as the larger upfront gift helps to remove those assets from the donor’s estate and maximize compound growth inside the 529 plan.

Why open separate 529 accounts for K-12 and college expenses?

When planning, keep in mind the separate costs and different timelines for K-12 and college expenses.

As you start off your savings, determine the total amount you’ll need to cover for both K-12 and college expenses. Match your investments within the 529 plan to the time horizon for withdrawals for both, as the earlier K-12 expenses and the later college expenses will have different timelines.

If your contributions only consider the time horizon of college, your early withdrawals for K-12 expenses could possibly negate the growth potential of the contributions that are earmarked for later college expenses.

To simplify the investing and saving process, it may help to have a 529 plan dedicated for K-12 expenses and a separate one for college expenses. There are no limits to the number of 529 plans you can set up but be sure to review the contribution limits, costs and expenses associated with setting up multiple accounts.

How to use 529 plans in your financial plan

As you’re determining which options are best for your children’s education needs, consider how using a 529 plan for K-12 expenses may fit into your financial plans. Consult with a financial advisor to discuss strategies that will be most advantageous in meeting your goals over the long-term.

Learn how we can help you plan for your children’s education.

For more information regarding college savings plans, please visit www.collegesavings.org. Participation in a 529 plan does not guarantee the investment return on contributions, if any, will be adequate to cover future tuition and other higher education expenses. Before investing in a 529 College Savings Plan, consider your state of residence, which may offer a 529 College Savings Plan with state tax or other benefits available only to residents of the state. Federal income tax on the earnings and a 10 percent penalty on distributions for non-qualified expenses may apply.