Harry W. Laughlin III
ATTORNEY AT LAW
Former IRS Attorney
Accredited Estate Planner
2017-2025 Super Lawyer
LICENSED IN TENNESSEE & DISTRICT OF COLUMBIA
September 11, 2025
How to benefit from Section 529 Plans and recent changes?
WHAT IS A 529 PLAN?
A Section 529 Plan is a tax-advantaged savings plan created to encourage saving for future education costs with tax advantages for qualified withdrawals. Contributions are not deductible on federal returns but may qualify for state tax deductions or credits. Investment growth and distributions for qualified education expenses are tax-free. Funds from a 529 plan can be used to pay for many qualified higher education and K-12 expenses.
CONTRIBUTION AND GIFT LIMITS
Contributions to 529 plans are treated as gifts to the beneficiary, so generally you can’t contribute more than the annual gift exclusion amount each year. The federal gift tax exclusion rose from $18,000 to $19,000 per beneficiary for 2025.You can take advantage of an exception to the annual exclusion by making a lump-sum contribution of up to $95,000 ($190,000 from married couples). By electing to spread this contribution over a 5-year period, you could potentially bypass the gift tax entirely.
QUALIFIED TAX-FREE WITHDRAWALS
You can use your 529 plan for a wide range of education expenses such as College and vocational programs tuition, fees, books, supplies, computers, room and board.
In addition, you can cover K-12 tuition up to $10,000 per year per beneficiary. This limit doubles to $20,000 in 2026. Distributions for non-qualified expenses incur income tax and a 10% penalty on earnings.
HOW TO BENEFIT FROM RECENT CHANGES TO 529 PLANS
Under the One Big Beautiful Bill act (OBBBA), effective July 4, 2025, funds from a 529 Plan can now be used for a broader range of expenses such as:
- Tax-free payouts for curriculum materials, online education, tutoring, advanced test fees, dual enrollment, and licensed educational therapies for students with disabilities.
- Certain apprenticeship and career credentialing programs now qualify.
WHAT YOU CAN DO WITH UNUSED FUNDS
- Pay off student loans: Up to $10,000 lifetime per beneficiary,
- Roll over Plan funds to another family member’s 529 plan,
- Transfer to an ABLE account for a disabled beneficiary or sibling,
- Roll over up to $35,000 (lifetime) to a beneficiary’s Roth IRA (the 529 must be open ≥15 years; annual limit $7,000 in 2025).
BEWARE: Before making withdrawals be sure to check state and local rules, particularly regarding homeschooling tuition and materials.
.
TO FIND OUT HOW TO QUALIFY: ACT!!
Ø Call or email me at hwlaughlin@901bizlaw.com to schedule a free consultation.
Ø I’ll use my custom Prep-to-Plan™ software to identify every tax benefit available to you.
Ø Act now—tax strategies and recordkeeping deliver the best results when planned ahead.
6800 POPLAR AVENUE SUITE 210 GERMANTOWN, TN 38138 CELL: (901) 218-7820