What the "Big, Beautiful Bill" means for 529 plans

The recently passed "Big, Beautiful Bill" brings sweeping changes to how American families can save for the future. Among the most notable developments are exciting updates to 529 plans and the introduction of a brand-new savings vehicle known as the “Trump Account.”

In light of these changes, we believe 529 plans continue to stand out as the most effective and versatile tool for education savings. With their expanded coverage and unique tax benefits, 529s remain as an ideal way to save for all things education.

What’s new for 529 plans?

The Big, Beautiful Bill expands the scope of 529 plans, increasing their versatility and value for families planning ahead.

Support for trades, licensing and continuing education

Starting July 4, 2025, families are able to use 529 funds for a wider range of education paths. This includes vocational training for high-demand skilled trades including plumbing, HVAC repair, welding, and aviation mechanics. The expansion includes preparation and exam fees for licenses and certifications in fields like accounting, law and finance. Programs must generally be recognized under the Workforce Innovation and Opportunity Act (WIOA) or the WEAMS database.

Broader K–12 education coverage

Starting in July 2025, families can also use their 529 plan for a broader set of qualified education expenses, such as:

• Textbooks, workbooks and curriculum materials
• Tutoring services
• Online education platforms or subscriptions
• Educational therapy for students with disabilities
• Standardized test fees (e.g., SAT, ACT, AP exams)
• Dual-enrollment college courses taken during high school

Higher annual K–12 spending limit

Beginning in 2026, the annual cap for K–12 education expenses paid through a 529 plan will double from $10,000 to $20,000 per child. This provides greater financial support for families who choose private or specialized education options.

What are Trump Accounts?

The new legislation also introduces a savings tool called the Trump Account. These are starter retirement accounts for children, created as a special type of traditional IRA rather than an education savings plan.

Here’s a quick breakdown of how they work:

• Children born between 2025 and 2028 will receive a one-time $1,000 government deposit into a Trump account
• Families can contribute up to $5,000 per year (indexed for inflation), not including the federal seed deposit or certain employer contributions
• Until the child turns 18, all funds must be invested in low-cost U.S. equity index funds
• No withdrawals are allowed before age 18, except for limited rollovers to ABLE accounts
• After age 18, the account converts to a traditional IRA, and standard withdrawal rules apply (including potential taxes and penalties)

Why 529 plans remain the best choice for education

Even with the introduction of Trump Accounts, 529 plans continue to offer key advantages for families saving for education:

1. Tax-free growth and withdrawals¹

529 plans offer true tax-free growth when used for qualified education expenses. That includes tuition, room and board, textbooks, and, under the new law, even more K–12 and vocational expenses. Trump accounts only offer tax deferral, and withdrawals are taxed as ordinary income unless they meet certain exceptions.

2. Higher contribution limits

529 plans allow for much larger contributions than Trump Accounts. Families can contribute up to $19,000 per year per donor (or $95,000 up front using a five-year gift-tax averaging strategy), with lifetime limits often exceeding $300,000. Trump Accounts are capped at $5,000 per year (indexed), which may not keep up with rising education costs.

3. Flexibility and transferability

529 plan funds can be transferred to other family members if the original beneficiary doesn’t use the funds. Leftover funds can also be rolled into the beneficiary’s Roth IRA (up to a lifetime cap). Trump Accounts are tied to the child and follow stricter IRA rules.

4. Broader education coverage

In addition to college tuition, 529 plans can now be used for many types of learning—including apprenticeships, K–12 expenses and even student loan repayment (up to $10,000). Trump Accounts can’t be accessed until age 18, which excludes any use for early education or high school expenses.

5. No expiration or forced withdrawals

529 plans can stay open indefinitely. There are no required minimum distributions, so unused funds can continue to grow or be passed along to future generations. Trump Accounts, on the other hand, become standard IRAs after age 18 and follow traditional retirement account rules, including mandatory withdrawals later in life.

The bottom line

The Big, Beautiful Bill introduces important updates to the savings landscape. While Trump Accounts offer a nice boost for long-term financial planning, they’re not meant to replace 529 plans. For families focused on education savings, 529 plans remain as a powerful and flexible investment tool option.