National 529 Day is recognized on May 29—and it’s a great reminder that saving for education can start with something as simple as a small, steady habit. A Qualified Tuition Program (more commonly called a “529 plan,” named for Section 529 of the Internal Revenue Code) offers federal tax advantages that can help families save for college, trade or vocational schools, and even certain K–12 expenses.
Quick Takeaways
- 529 plan contributions aren’t federally deductible, but earnings can grow tax deferred—and qualified withdrawals are generally federal income tax free.
- In 2026, you can gift up to $19,000 per student ($38,000 for married couples), with an option to front-load five years at once ($95,000 single / $190,000 married).
- Funds can cover more than college: K–12 (up to $20,000/year), trade school, apprenticeships, and some workplace credentialing costs.
- If money is left over, you may be able to change beneficiaries—or, in some cases, use a portion for the beneficiary’s Roth IRA.
The Benefit of Time, Consistency and Compounded Earnings
While there is no federal income tax deduction for contributions, 529 plan investments generally grow tax deferred—and if used for qualified education expenses, withdrawals are income tax free[i]. Many states also offer a state income tax deduction or credit, which is often tied to contributing to your state’s 529 plan (with a few exceptions).
This year you can contribute up to $19,000 per student/beneficiary (the annual gift limit). But you can also elect to front-load five years of contributions using a special “5-year advance funding” rule. It allows up to five years of gifts at once—up to $95,000[ii]. Married couples can double those amounts to $38,000 annually or $190,000 with the 5-year gift election.
Consider this example: If you start saving at your child’s birth and invest $30 a month (about $1 per day) in a tax-advantaged 529 plan, you could have $9,768 by the time your child turns age 18, assuming a 5% annual rate of return. In this scenario, you contributed $6,120—and the other $3,648 represents the compounded growth.
Tax-Free Withdrawals for Education
If the student attends a college or university at least half-time, qualified education expenses generally include any expense that is required for enrollment or attendance such as:
- Tuition and fees
- Books and supplies
- Housing and food (also referred to as room and board)
- Repayment of student loan debt (up to $10,000) for the student or siblings of the student
And 529 plans aren’t just for college-bound students. They can also be used tax free for K–12 expenses (up to $20,000 per year), as well as for trade schools and registered apprenticeship programs after high school—and even for adults requiring certain workplace licensing programs or credentials.[iii]
What If the Child Doesn’t Use All of the 529 Plan?
The account owner always has the flexibility to change a beneficiary, income tax free, to another eligible family member. For example, you could move all or part of the savings from your oldest child to a younger child or keep the savings in the 529 plan and in the future change the beneficiary to the current beneficiary’s children.
Long-term unused 529 education savings plan balances can also be used tax free to fund a Roth IRA for the 529 plan beneficiary’s future retirement income. There are some requirements you have to meet to use this feature of a 529 plan which includes aging the balances for at least 15 years, not using more than $35,000 over the lifetime of the student for Roth IRA funding, and not using any of the contributions or earnings from the prior five years.
Why Planning for Education Costs is Important
The tax advantages and flexibility of a 529 savings plan make it a more attractive alternative than using your personal or retirement savings. And every dollar saved in a 529 plan can reduce the possible reliance on student loan debt in the future.
Consider this: the average one-year undergraduate cost for the 2025–2026 academic year (tuition, fees, housing, and food) at a 4-year public out-of-state college was $45,780, and $25,850 for an in-state 4-year public school.[iv] Multiply that by four – for the number of years it typically takes for a student to receive their degree and it’s easy to see why there’s no better time to build a plan for your loved one’s education. Contact a Benjamin Edwards financial advisor today to learn more about 529 education savings plans.
Come Back for More Summer Savings Strategies
To kick off the unofficial start to summer, our Summer Savings Strategies series will bring you valuable ideas each week. We have started with saving for education, but we will also cover a variety of topics including ways you can save for your retirement, including the new Trump accounts for kids, financial strategies for recent college graduates, why a midyear money reset is beneficial, how you can protect your savings with annuities and how an efficient estate plan can save your family money.
[i] Withdrawals that are not used for qualified education expenses typically result in federal income taxes and a 10% penalty on the earnings portion of the withdrawal. Some exceptions to the penalty apply. Non-qualified withdrawals can also result in a recapture of state income tax benefits previously received.
[ii] When making the election for advanced 5-year gifting to fund a 529 education savings plan for the maximum amount, any additional gifts made to the student/beneficiary during the 5-year period would be considered a taxable gift, unless the gift tax exemption increases. With the advanced gifting election, the gift is prorated over five years equally.
[iii] Student loan repayments, K-12 expenses, registered apprentice program expenses, and workplace credentialling expenses although recognized as qualified tax-free distributions for federal income tax purposes, may not be considered qualified distributions for your state income tax return. State non-qualified withdrawals can result in a recapture of the previously provided state tax deduction or credit.
[iv] The College Board, “Trends in College Pricing and Student Aid 2025”, Table CP-1.
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.
IMPORTANT DISCLOSURES: The information provided is based on internal and external sources that are considered reliable; however, the accuracy of this information is not guaranteed. This piece is intended to provide accurate information regarding the subject matter discussed. It is made available with the understanding that Benjamin F. Edwards is not engaged in rendering legal, accounting or tax preparation services. Specific questions on taxes or legal matters as they relate to your individual situation should be directed to your tax or legal professional.