529 savings plans: They’re not just for college anymore.

Although 529 plans were created to help pay for children’s college tuition, those funds can also be used for a variety of qualified educational expenses. In fact, a series of changes to federal law have given investors added flexibility for how they can put 529 dollars to work — even if their children don’t pursue traditional college paths.

As a reminder, 529 plan contributions are made on an after-tax basis. The earnings grow tax-deferred, and withdrawals are free of federal income tax and generally not subject to state tax when used for qualified education expenses. Many states also offer tax deductions or credits for 529 contributions. Since the plans are state sponsored, they differ from state to state with respect to investment options and the income tax treatment of withdrawals. If withdrawals are used for purposes other than qualified education expenses, the earnings may be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. 

Here are nine ways to put a 529 plan to use:

1. Roll unused 529 funds directly into a Roth IRA.

Under the SECURE 2.0 Act of 2022, if there are unused funds in a 529 plan, they can now be directly rolled into a Roth IRA for the beneficiary of the 529 plan (subject to certain limitations, including a $35,000 lifetime maximum per beneficiary). This can be done tax- and penalty-free over the beneficiary’s lifetime. 

This rollover option provides extra flexibility, especially for those with surplus 529 funds, recipients of scholarships, or individuals choosing not to pursue higher education. 

However, there are specific limitations put in place regulating the use of 529-to-Roth IRA rollovers. First, the 529 account must have been open for a minimum of 15 years, and the Roth IRA needs to be under the name of the same beneficiary of the 529 plan. Next, the rollover amount must have been in the 529 account for at least five years. Further, rollover contributions must adhere to IRA annual contribution limits, including any other IRA contributions made by the beneficiary in that year. 

Although the income limitations for regular Roth IRA contributions don't apply to 529-to-Roth rollovers, the beneficiary must have earned income of at least the amount being rolled over. These conditions are designed to preserve the purpose of 529s as education savings accounts and discourage their use as tools for transferring wealth.

2. Pay off student loan debt with 529 funds. 

Many Americans, even those who benefited from 529 accounts, struggle to repay student loan debt after graduation. To that end, the SECURE Act of 2019 established a lifetime limit of $10,000 from a 529 account that can be used to repay the beneficiary’s qualified student loans tax- and penalty-free, including federal and most private loans. An additional $10,000 can be used to repay qualified student loans held by each of the beneficiary’s siblings. 

3. Use a 529 to pay for elementary and secondary school tuition.

Since 2018, when the Tax Cuts and Jobs Act of 2017 (TCJA) took effect, parents have been able to use a 529 to pay up to $10,000 per year for kindergarten through 12th grade (K–12) tuition expenses. 

Though the tax-free earnings on withdrawals used for such tuition expenses may not be very high — parents are likely to spend their 529 funds on K–12 tuition quickly, leaving little time for earnings growth — the state tax deduction benefits offered by many states may be worthwhile. 

However, advisors and investors should do their homework before assuming that state-level tax benefits are guaranteed. Tax-advantaged treatment applies only to savings used for qualified education expenses, and state tax treatment varies. For example, withdrawals for K–12 expenses are not exempt from state tax in a number of states, including California and New York.

4. Roll 529 savings into an ABLE account to pay for disability expenses.

Achieving a Better Life Experience (ABLE) accounts were established in 2014 to allow people with disabilities and their families to save money for disability-related expenses. Earnings in ABLE accounts grow on a tax-deferred basis and can be withdrawn tax-free for eligible expenses such as housing, transportation and assistive technology. Like traditional 529 accounts, ABLE accounts can also be used to cover education expenses. If withdrawals from ABLE accounts are used for purposes other than qualified disability expenses, the earnings will be subject to a 10% federal tax penalty in addition to federal and, if applicable, state income tax. Again, state tax treatment varies.

But sometimes parents who have started traditional 529 accounts for their children realize only later, after a child’s disability diagnosis, that they would really benefit from an ABLE account. Fortunately, the TCJA allows 529 account holders to roll their funds into ABLE accounts — up to the annual contribution limit of $18,000 (for 2024) — until January 1, 2026. A 529 account can be rolled into an ABLE account for the same beneficiary or for a different beneficiary within the same family. For instance, a family may roll money from a 529 account benefiting one sibling into an ABLE account benefiting another sibling.

Under the SECURE 2.0 Act, the starting age to qualify for disabilities in ABLE accounts has changed substantially. Previously, ABLE account eligibility was limited to individuals who became disabled before age 26. However, the SECURE 2.0 Act has increased the age limit by two decades. Beginning in 2026, individuals who become disabled before turning 46 may open an ABLE account.

5. Use a 529 to pay for vocational school, apprenticeships, community college, online courses, and graduate programs.

Though many associate 529 plans with four-year colleges, they can be used to fund tuition and other educational expenses at a variety of post-secondary institutions and programs, including community colleges, trade and vocational schools, graduate schools and qualifying online course and degree programs. 

To determine whether a school or program is eligible for 529 spending, check with its admissions office or search the U.S. Department of Education’s accreditation database. Qualified education expenses include fees, books, supplies and equipment required for the participation of a designated beneficiary.

The SECURE Act also expanded qualified 529 expenses to include registered apprenticeship programs. The U.S. Department of Labor provides a search tool to find out if an apprenticeship program is eligible. If it is, 529 plan funds can be used toward program fees, books, supplies and equipment, including tools required for the participation of a designated beneficiary in certain apprenticeship programs.

6. Technology and internet access can be 529 qualified expenses.

In the digital age, education and technology go hand in hand. Fortunately, 529 withdrawals can cover “the cost of the purchase of any computer technology, related equipment and/or related services such as Internet access,” according to the IRS. Such equipment includes printers, but not equipment that is intended mainly for entertainment purposes. Computer software used for educational purposes is also covered.

7. Prepare for a career change by creating a 529 for yourself.

529 plans aren’t just for kids and teens. Adults can set up 529s to cover their own educational expenses, which may prove especially handy to those pursuing a change of careers. Joe Hurley, the founder of Savingforcollege.com, used 529 funds to earn a horticulture certificate. Hurley, who began his career as an accountant, now runs a farm.

There are a couple of ways adults can take advantage of 529 plans. The most direct way is to open new accounts and designate themselves as the beneficiaries. Parents can also "take over" existing 529 plans that once benefited their children. For instance, if a child wins a scholarship and her college expenses prove lower than originally anticipated, a new beneficiary in her family — including her parents — can be designated for the account and use its excess funds without facing a tax penalty. Hurley paid for his horticulture courses with his children's leftover 529 funds.

8. A 529 can help you save during retirement.

401(k)s and IRAs are the most popular vehicles for retirement savings, but 529 plans can play a role, too — at least for seniors who would rather spend their golden years in a classroom than on the golf course. That's because 529 funds can be used to pay for college courses or continuing education classes at qualifying institutions. Here, once again, checking with an institution's admissions office or searching the Department of Education's database can help current and future retirees determine where they can spend their 529 funds.

9. 529 plan contributions are tax-advantaged gifts.

Whether it's for a birthday, a holiday or for no reason at all, relatives and friends can use 529 plans to give gifts to the children in their lives. Grandparents, aunts, uncles or anyone else wishing to help fund a child's education may contribute to an existing 529 account or open a new one and name the child as the beneficiary. Individuals can contribute up to $18,000 ($36,000 for married couples) in 2024 without gift-tax consequences. 

Are these gifts deductible? Maybe. Contributions to a 529 plan account are not tax deductible at the federal level. But they may be at the state level. More than 30 states offer state tax deductions or credits for contributions to their state's 529 plan, although some states restrict that benefit to owners of the account. 

It may be out of reach for many gift givers, but 529 gifts come with a special tax exemption: superfunding. Benefactors can accelerate five years’ worth of contributions by investing five times the annual gift limit in a 529 at once, so $90,000 for individuals or $180,000 for married couples in 2024. This might be an especially attractive option for those intent on minimizing future estate taxes or anyone contributing cash to a student who could use the funds right away. Additional gifts made to that beneficiary over the next four years after the year in which the one-time gift is made may reduce the donor’s lifetime gift and estate tax exemption. If the donor of an accelerated gift dies within the five-year period, a portion of the transferred amount will be included in the donor’s estate for tax purposes. Consult with a tax advisor regarding your specific situation.

Today, more than ever, 529 plans can help investors and their children achieve a range of educational, career and retirement goals. With the right planning and advice, Americans can save their money while enriching their minds.

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