Part 8—Understanding Updates to Education Savings Options

College costs continue to rise, and career paths are more diverse than ever. Families need flexible, tax-smart ways to prepare their children for success, whether that means traditional college, trade school, or starting a business. Recent federal legislation introduced two significant changes to education and career savings: expanded 529 plans and new Trump Accounts.

Expanded 529 Plans: More Flexibility Than Ever

529 plans have been significantly enhanced beyond just college tuition:

• Broader K–12 Coverage

  • Tax-free withdrawals now include curriculum materials, textbooks, online educational resources, tutoring services, standardized test fees (SAT, ACT, AP), dual-enrollment college courses, and educational therapies such as speech or occupational therapy.

• Higher K–12 Spending Limit

  • Starting in 2026, the annual limit for K–12 withdrawals doubles from $10,000 to $20,000 per student.

• Career Training Support

  • Funds can now pay for accredited vocational and career-training programs—including tuition, materials, exam fees, and tools needed for professional credentials or licenses.

• Permanent ABLE Account Transfers

  • Families can now permanently roll unused 529 funds into ABLE accounts for family members with disabilities—a previously temporary option that is now permanent.

Why this matters: 529 plans now support the full spectrum of learning, from elementary tutoring to trade certifications, making them more valuable for today's diverse educational paths.

Introducing Trump Accounts: A New Savings Tool

The legislation also creates Trump Accounts—a new type of tax-advantaged savings account designed for maximum flexibility:

• Contribution Limits

  • Up to $5,000 per year from families

  • Additional $2,500 possible from employers

  • Limits adjust annually for inflation

• Tax Benefits

  • Funds grow tax-deferred

  • Withdrawals are free from capital gains tax after age 18

• Approved Uses Include:

  • College or vocational education

  • Career training and professional certifications

  • First-time home purchase

  • Small business startup costs

• Government Seed Money

  • Children born between 2025 and 2028 receive a $1,000 federal deposit at birth to jumpstart their account.

Comparing Your Options

Feature	529 Plan	Trump Account
Who Can Open	Anyone for any beneficiary	Parent/guardian for child under 18
Age Limit to Open	No age limit	Must be opened before age 18
Government Seed Money	No	$1,000 for children born 2025–2028
Annual Contribution	No federal limit (state lifetime caps apply)	$5,000 + up to $2,500 employer match
Deadline for Contributions	No fixed contribution deadline	Ends at child's 18th birthday
When Funds Are Available	Anytime for qualified education expenses	Age 18 (partial access), full access at 30
Control & Ownership	Account owner controls usage; beneficiary access depends on owner's discretion	Held in trust until age 18; then partially accessible to child gaining full access at age 30
Qualified Uses	Education-related expenses	Education, homeownership, business, retirement
K–12 Coverage	Yes, up to $20,000/year starting 2026	No
Flexibility	Can change beneficiaries	One account per child
Tax Treatment on Contributions	After-tax (no deduction), but grows tax-free	After-tax (no deduction), but grows tax-free
Penalty for Non-Qualified Use	Tax + 10% penalty on earnings	Tax + 10% penalty on earnings
State Tax Benefits	Available in many states	Currently none

The Bottom Line

These changes give families more tools to invest in their children's futures, regardless of the path they choose:

• 529 Plans now support a much broader range of learning and career preparation

• Trump Accounts offer long-term flexibility for education, homeownership, and entrepreneurship

Whether you are planning for a newborn or helping a teenager prepare for their next chapter, these enhanced savings options can help you build a stronger financial foundation for their success.

These new opportunities will not benefit your family automatically—they require strategic planning and proper implementation. Do not let confusion or inaction cost your children their best financial start.

Take the next step:

• Review your current education savings strategy

• Explore which combination of options works best for your family's goals

• Get personalized guidance on maximizing tax benefits and contribution timing

• Ensure your savings plan adapts as these new rules take effect

The families who act early will have the greatest advantage. Contact us today if you are unsure about how to start planning for your child’s college education.

In our next post, discover how new federal rules aim to hold underperforming college programs accountable—and why key borrower protections are being put on hold until 2035.

This information is for educational purposes only and should not be considered tax or investment advice.