529 Plan Guide 2026: Everything You Need to Know

What Is a 529 Plan?

A 529 plan is a state-sponsored, tax-advantaged savings account designed to help families save for education expenses. Contributions are made with after-tax money, grow tax-free, and withdrawals for qualified education expenses are completely tax-free at the federal level.

2026 Key Facts

• Annual contribution limit: No federal limit, but contributions above $18,000/year per beneficiary may trigger gift tax reporting
• Lifetime limit: Varies by state, typically $300,000-$550,000
• Qualified expenses: Tuition, fees, room and board, books, computers, and K-12 tuition (up to $10,000/year)
• SECURE 2.0 update: Unused 529 funds can now be rolled into a Roth IRA (up to $35,000 lifetime, subject to conditions)

How 529 Plans Work

You open a 529 plan through your state or any state's plan (you're not required to use your home state's plan), deposit money, and invest it in mutual funds or ETFs. The money grows tax-free. When your child uses it for qualified education expenses, withdrawals are also tax-free.

Choosing a 529 Plan

Key factors to consider:

• State tax deduction: Many states offer a state income tax deduction for contributions to their own state's plan. Check your state first.
• Investment options: Look for plans with low-cost index fund options
• Fees: Some state plans have high administrative fees. Utah, Nevada, and New York consistently offer low-cost options.

What If My Child Doesn't Go to College?

With SECURE 2.0 (effective 2024), unused 529 funds can be rolled to a Roth IRA for the beneficiary after 15 years, up to $35,000 lifetime. You can also change the beneficiary to another family member, use for K-12 tuition, or pay student loans (up to $10,000).