President Trump's tax package, the One Big Beautiful Bill Act, passed the House in May and will next need to clear the Senate before he can sign it into law. Among its key proposals is an expansion of 529 education savings plans created to help families save for future education expenses. Not just a college savings vehicle, 529 plans can also be useful estate planning and retirement savings tools.
With a 529 plan, contributions grow tax-free, and withdrawals for qualified education costs are also tax-free. Considering the cost of college, a little help now could go a long way in planning for your child’s education.
A 4-year college degree at a public in-state school runs about $120,000 (think tuition, books and supplies, dorm room, and extras). On average, a college student graduates with about $39,000 in student loan debt. And that’s just the average. Multiply that amount by the number of students attending college (about 43 million), and you get about $1.6 trillion in federal student loan debt as of early 2025, per the U.S. Department of Education. Yikes.
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Good news — your 529 savings plans may get a sweet upgrade.
Expanded 529 plans
The proposed enhancements to 529 plans under Trump's budget-reconciliation package call for a significant expansion of 529 plan benefits and include a brand-new Kids’ savings program called the MAGA account.
The legislation still needs to clear the Senate. However, it’s got a solid shot at landing on the president’s desk this summer since Congress can push it through with just a simple majority using reconciliation.
Here’s what to look for.
529 qualified expenses would cover more K-12 costs
Currently, 529 plans allow you to withdraw up to $10,000 per year for K-12 tuition. If passed, the bill would add seven additional homeschooling and K-12 “qualified higher-education expenses,” such as:
- Curriculum materials
- Fees for nationally standardized tests
- Books and other instructional materials
- Dual-enrollment fees for college courses taken in high school
- Online educational materials
- Tutoring or educational classes outside the home
- Specialized strategies designed to support students with disabilities
On top of that, you can tap your 529 for these costs without federal tax worries. At the same time, any expansion of K-12 benefits may require new legislation on a state-by-state basis, as not all states currently consider K-12 expenses as qualified expenses for tax purposes.
Read: Trump's ‘One Big, Beautiful Bill’ With Trillions in Tax Cuts: Passes House
On-the-job training and continuing education would become 529-eligible
The proposal also allows a wide range of workforce, on-the-job training and continuing education credentials as qualified expenses. Tuition, books, fees and exam costs, books and supplies for the programs below may be covered.
- Programs that appear on a state or federal Workforce Innovation and Opportunity Act list
- Programs listed in the VA’s WEAMS database
- Programs that prepare students for industry-recognized licensing exams
- Continuing-education fees that may be required to keep a credential active
Fixed ABLE-account flexibility
Three Achieving a Better Life Experience (ABLE) provisions that are currently set to expire at the end of 2025 would become permanent. They include the “ABLE-to-Work” contribution limit, the Saver’s Credit for ABLE contributions, and tax-free 529-to-ABLE rollovers.
A brand-new “MAGA” kids’ account in 2026
While not a 529 plan, the Money Accounts for Growth and Advancement (MAGA) program can also be used for saving for your child's education. Under the terms of the bill, funding of up to $5,000 per year is allowed. Contributions can come from a parent or guardian for a child under 8, and any gains would be taxed at the long-term capital gains rate when used for higher education, a first-home purchase, or starting a small business.
The bill also calls for a one-time contribution of $1,000 from the federal government to the accounts of children born between January 1, 2025, and January 1, 2028. Any unused funds could be withdrawn for any reason after age 30. First withdrawal would be at age 18 (up to 50% of the balance). Earlier withdrawals for non-qualified expenses would be taxed at ordinary income rates.
What 529 rules stay the same
Although the bill would expand how you can use 529 money, many of the current rules remain the same.
- No change to federal 529 contribution rules
- Lifetime caps on contributions remain state-specific
- The $10,000 per-year K-12 tuition limit and existing $10,000 lifetime limit for student-loan repayments remain intact
- Federal tax treatment of 529 growth and in-state tax deductions, and credits remain as is
Proposed timeline
The House just passed Trump's One Big Beautiful Bill Act, meeting Speaker Mike Johnson’s (R-La.) Memorial Day deadline for initial passage. So, attention now turns to the U.S. Senate. If all goes well, the bill will arrive on Trump's desk by July 4 (the committee's goal). No enactment date has yet been set. However, January 1, 2026, is when MAGA accounts open and the federally funded $1,000 newborn deposits begin.
The last word
It doesn’t matter if your child is a teen or a toddler; it’s never too soon to start saving for college with a 529 plan — just make sure you’ve paid down or paid off your debt, set up an emergency fund and are saving for your retirement first.
If you’re already using a 529, Trump’s “One, Big, Beautiful Bill” may only sweeten the deal. But when the new rules are final (assuming the bill will pass), just be ready to adjust your withdrawal strategy.
A college education follows your kids for life, just make sure the cost of funding it doesn't take a toll on your finances for the rest of your life.
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