Blogs
What's New Trending
-
- September 1, 2025
- Investments
- (0)
- 03 Mins
From 529 Plans to New Savings Accounts: How to Secure Your Child’s Future
If you’re saving for your child’s education, you’ve probably heard of 529 plans—the flexible, tax-advantaged accounts designed to help families invest for future schooling costs. This year, big changes arrived, expanding 529 plans to help even more Americans. Here’s your guide to the newest rules and what they mean for your family’s savings strategy.
1. Higher K–12 Withdrawal Limits & New Qualified Expenses
Starting January 1, 2026, families can withdraw up to $20,000 per student annually from their 529 plans for K–12 education—double the previous limit of $10,000. But it’s not just about higher dollar amounts.
The definition of “qualified K–12 expenses” is now much broader. You can use 529 funds for:
- Tuition at private, public, or religious schools
- Curriculum, textbooks, and instructional materials
- Educational software
- Standardized testing fees (SAT, ACT, AP, etc.)
- Dual enrollment college courses for high school students
- Specialized therapies for children with disabilities (provided by licensed professionals)
- Tutoring and classes taught by qualified, non-relative instructors
This means more families—especially those in states where private or alternative education is common—will benefit from expanded flexibility in school choice and supplemental support.
2. More Ways to Pay for Career & Postsecondary Education
The scope of 529 plans now extends to career-focused learning:
- Vocational and technical programs
- Professional licenses and continuing education
- Registered apprenticeship costs
- Career advancement courses recognized by the military
If your child’s future looks non-traditional—trade school, culinary arts, coding bootcamps, or other certificate programs—your 529 funds are now fair game.
3. 529-to-Roth IRA Rollovers: Saving for Retirement, Too!
Worried about over-saving for education? A groundbreaking reform lets unused 529 funds roll over into a Roth IRA for the beneficiary. Here’s what you need to know:
- The 529 account must be open for at least 15 years.
- $35,000 lifetime rollover cap applies.
- Only contributions made up to five years prior to rollover are eligible.
- Annual Roth IRA contribution limits and income requirements still apply.
- The new provision specifies that the rollover must go into the Roth IRA of the same individual who is the beneficiary of the 529 plan. It cannot be rolled into the parent’s Roth IRA unless the parent is also the named beneficiary of that 529 account.
This offers peace of mind for parents: even if college plans shift, your savings can still support your child’s financial future.
4. Higher Annual Gift Limits
The annual gift tax exclusion for 529 contributions is now $19,000 per person in 2025. This means grandparents, relatives, and friends can contribute more tax-free—and makes it easier to fund a child’s account faster.
5. New Child Savings Program Launching in 2026: MAGA Accounts
The MAGA kids savings account, officially called the Money Account for Growth and Advancement (MAGA Account), is a federally backed savings program for children born between 2025 and 2028. It is designed as a long-term investment account to help children build financial security.
The account has features resembling an investment account more than a strict education or retirement account. Key points about its purpose and usage are:
- The government seeds each eligible child’s account with $1,000 initially.
- Parents, relatives, or employers can contribute up to $5,000 annually.
- Funds are invested in a U.S. equity index fund.
- Children can access 50% of the funds at age 18 and the remaining at age 25.
- Qualified uses for the money include education costs, buying a first home, or starting a business.
- After age 30, funds can be used for any purpose.
- The account is federally managed and designed to provide tax benefits and long-term growth.
- The account is not a retirement account but a childhood savings and investment account with a focus on growth and potential future expenditures like education, home purchase, or entrepreneurship.
6. The Same Federal Limits—and More State Incentives
Some things haven’t changed: total federal contribution caps remain, along with tax-free investment growth and penalties for nonqualified withdrawals. But states are updating their own incentive programs—look for possible new state tax deductions, bonus contributions, or matching funds.
Special Note for California Families
California residents don’t receive a state income tax deduction or credit for 529 plan contributions, and the state’s maximum withdrawal for K–12 tuition remains at $10,000 per year per student. While the ScholarShare 529 plan offers strong investment options and federal tax benefits, California hasn’t yet adopted the expanded state incentives or higher K–12 limits available elsewhere.
The new rules make 529 plans more powerful and adaptable than ever. Whether you’re saving for preschool, high school, college, or career changes, these updates ensure that the money you put aside works harder for your child’s future.
Leave a Reply