A 529 plan is a state-sponsored education savings account whose investment growth is tax-free when it is withdrawn for qualified education costs.
Contributions aren't deductible on your federal return, though many states offer a state tax break for using their plan. Qualified costs include college tuition, fees, books, and room and board for students enrolled at least half-time; up to $20,000 a year per beneficiary for K-12 expenses from 2026 (it was $10,000); registered apprenticeship costs; and up to $10,000 over a lifetime of student loan repayment.
Money withdrawn for anything else has its earnings taxed, generally plus a 10% additional tax. Leftover money can be switched to another family member. Since 2024, up to $35,000 over a lifetime can also be rolled into the beneficiary's Roth IRA if the 529 has been open at least 15 years, within the annual Roth contribution limit.
Contributions count as gifts to the beneficiary. In 2026 you can give up to $19,000 per person without using any of your lifetime gift and estate tax exemption.
How to check
You can use any state's plan, so compare fees and investment options. If your own state offers a tax deduction, weigh it against a lower-cost plan elsewhere.
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