529 plans now cover more education expenses, and some unused money can move to the beneficiary’s Roth IRA. For 2026, the federal K–12 limit is $20,000 per beneficiary, up from $10,000. Eligible credential programs also gained coverage. The Roth rollover has a separate $35,000 lifetime cap and strict eligibility rules. These changes add flexibility; they do not turn a 529 into an unrestricted spending account.
What education expenses can it cover?
A 529 uses after-tax contributions. Its main federal benefit is that investment earnings can come out tax-free when the withdrawal pays qualified expenses.
| Use | What to check before withdrawing |
|---|---|
| College and eligible postsecondary education | Tuition, required fees, books, and equipment can qualify. Room and board has limits and generally requires at least half-time enrollment. |
| K–12 education | The 2026 $20,000 limit applies per beneficiary across accounts. Eligible costs now extend beyond tuition to specified materials, tutoring, tests, and other expenses. |
| Postsecondary credentials | The program, credential, and expense must meet the law’s requirements. A course calling itself “career training” is not enough. |
| Registered apprenticeships | Required fees, books, supplies, and equipment can qualify for an eligible registered program. |
The expanded K–12 expense categories and credential rules took effect for distributions after July 4, 2025. The higher K–12 dollar limit applies beginning in 2026. These dates are different—a 2025 withdrawal did not get the new $20,000 limit. See Public Law 119-21, sections 70413–70414 and IRS Publication 970.
Keep receipts and match withdrawals to eligible expenses. If you claim an education tax credit, you generally cannot use the same expense to justify a tax-free 529 withdrawal. Scholarships and other tax-free assistance also affect the calculation.
Federal eligibility is only half the check. A state may not follow every expansion and may recover a deduction you previously claimed. Check the rules where you file and the plan administrator’s requirements before taking the money out.
When can unused funds move to a Roth IRA?
An eligible 529-to-Roth transfer goes directly to a Roth IRA owned by the beneficiary, not the parent simply because the parent funded the account.
| Requirement | What it means |
|---|---|
| Lifetime limit | No more than $35,000 per beneficiary through this route |
| Account age | The 529 must meet the 15-year requirement |
| Age of contributions | Contributions and their earnings from the preceding five years cannot be rolled over |
| Annual contribution room | Other IRA contributions reduce the amount available for the year |
| Compensation | The beneficiary needs enough qualifying compensation to support the contribution |
| State treatment | A federally tax-free rollover can still have state consequences |
The usual Roth contribution income phaseout does not apply to this rollover. The other conditions still do. IRS Publication 590-A sets out the rollover limits.
Do not assume a beneficiary change or account transfer leaves every eligibility clock intact. Get the administrator’s requirements and applicable guidance before relying on a rollover years in advance.
Example: annual room can limit the transfer
Assume an eligible beneficiary under 50 earns at least $7,500 in 2026 and has already contributed $2,000 to an IRA. The $7,500 annual IRA limit leaves $5,500 for a qualifying 529 rollover. The account must still have enough eligible older contributions and earnings, and the beneficiary must have lifetime rollover room.
Even with $35,000 left in the 529, the full balance cannot move that year. Think of the rollover as a gradual option for surplus funds, rather than an immediate escape from overfunding.
What does five-year gift averaging do?
Gift averaging lets a donor elect to spread an eligible 529 contribution over five years for gift-tax annual-exclusion purposes. It does not spread out the actual investment: the money goes into the account when contributed.
The 2026 annual gift exclusion is $19,000. Five-year averaging can therefore cover $95,000 from one donor to one beneficiary, or $190,000 from two donors who meet the requirements.
The election requires Form 709 reporting. Other gifts during those five years can use up exclusion room, and a donor’s death during the period can bring part of the contribution back into the estate calculation. A large contribution is not automatically free of reporting just because it fits the headline amount. Use the Form 709 instructions for the election.
What if the education plan changes?
Start with what the beneficiary may still need: graduate school, another eligible program, or other qualified education expenses. Then compare a permitted beneficiary change, an eligible Roth rollover, and a nonqualified withdrawal.
With a nonqualified withdrawal, the earnings portion, rather than the whole withdrawal, is generally subject to income tax and an additional federal tax unless an exception applies. An exception to the additional tax does not necessarily make the earnings tax-free. State rules can add another cost.
Before putting more in, estimate the remaining education bill after grants and other funds. Then check whether the next contribution would leave your retirement savings or emergency cash short. The 529 comparison calculator can illustrate growth assumptions; it cannot decide which withdrawal will qualify.