You Can Use Your 529 for a Lot of Things
nts and apprenticeship programs qualified expenses for 529s. Which is great, although with the average 529 account balance just over $30,000 one might wonder why this change was made. After all, $30,000 barely gets you through the first year of college, to say nothing of having money left over for any of these other things.
Here's the thing: "What if my kid doesn't go to college?" is probably the number one reason that families don't save in 529s. Not only that, but the typical parent starts a 529 account when their child is around 7 years old. One of the most common reasons for delaying saving for college-- besides lack of free cash flow when you're paying for diapers and childcare and everything else that young children need-- is the worry that if the child doesn't go to college, money in a 529 will be wasted. So maybe all these new uses might get some families to start funding 529s earlier-- which results in a lot more money available for college.
Before getting into all the things you can use a 529 for, here are some things you cannot use it for:
Transportation to and from college, or a car
Student health insurance (unless it's mandatory, part of the cost of tuition, and cannot be waived if the student has other health insurance coverage)
Social activities such as Greek life, intramurals or tickets to sports
Other than that, most everything a student needs in college can be paid by your 529:
Tuition and fees, including for part-time and community college programs
Room and board, on- or off-campus, as long as the student attends college at least half-time
Books and other required supplies including a computer and internet access
All of the above expenses for graduate school
And if your student doesn't go to college but has a sibling who does, you have plenty of easy options such as changing the beneficiary on the account or, depending on the 529 plan, transfer the assets into the other child's account.
You can also save the excess for a future grandchild or take a nonqualified distribution and simply pay taxes and a 10% penalty on the growth in the account. The penalty is waived if the excess is due to scholarships. There is no requirement that money be removed from a 529 at any point; you could theoretically just keep changing the beneficiary to another younger family member until someone finally needs it.
Over the years, more and more alternate uses for 529s have been approved in the event that the 529 isn't used for college, or the student receives enough scholarships not to need it. Here are some additional qualified education expenses for your 529:
$20,000 per year can be used to pay for private K-12 tuition, starting in 2026.
Tutoring, standardized tests and dual enrollment fees.
Books and supplies for K-12 students.
Educational therapies and special needs equipment and services.
Some non-college-related expenses are also now qualified:
Apprenticeship programs
Credential programs and continuing education required to retain credentials
Up to $35,000, per beneficiary, can be rolled over to a Roth IRA. In order to do the rollover, the beneficiary must have earned income; annual rollovers can't exceed the Roth contribution limit.
Up to $10,000 can be used to pay off student loans. This is a per person limit; the beneficiary can be changed to allow another family member to pay off their student loan from the same 529.
As always, the devil is in the details. In the case of 529s, one of the details is whether or not your state conforms to these additional uses. Many do not, in which case a distribution might be qualified on your federal tax return but nonqualified on your state return. And if you took a tax deduction for your contribution, a clawback provision might apply. Check your state's rules before taking advantage of any of these expanded uses. In many cases, you're still better off taking advantage of a provision even if it means paying some state taxes.
