529 Plans: A Smarter Way to Save for Education

The cost of education keeps rising, and for many families, figuring out how to pay for it is stressful. A 529 plan can ease that burden. These accounts are built to grow tax-free and give you a smarter way to save for future education expenses. 

What Is a 529 Plan? 

A 529 plan is an investment account created under Section 529 of the Internal Revenue Code. The money you contribute grows tax-deferred, and when you use it for qualified education expenses, the withdrawals are tax-free. 

Qualified expenses include: 

• Tuition and fees 
• Books and supplies 
• Room and board (for students enrolled at least half-time) 
• Computers and technology costs 

The list of qualified expenses has also expanded to include K-12 costs beyond tuition such as curriculum, books and instructional materials, online courses, tutoring, testing fees, dual enrollment, and educational therapies for students with disabilities. The annual K-12 expense limit increases from $10,000 to $20,000 starting in 2026, although state tax rules may vary.

Why Use a 529 Plan? 

529 plans come with several unique benefits: 

1. Tax Advantages
   Growth is tax-free when used for education, and some states offer additional tax deductions or credits for contributions. 
2. High Contribution Limits
   Unlike other savings accounts, 529s allow you to save significant amounts. Parents and grandparents can even “superfund” an account by contributing five years’ worth of annual gifts at once without gift tax consequences. 
3. Flexibility Across Schools
   Funds can be used at most accredited colleges, universities, trade schools, and even certain international institutions. 
4. Rollover Options
   Up to $35,000 of unused 529 funds can be rolled into the beneficiary’s Roth IRA if the account has been open at least 15 years, only funds older than five years qualify, each year’s rollover is limited by the annual Roth contribution cap, and the beneficiary must have earned income equal to the amount rolled.

Common Questions About 529 Plans 

What if my child doesn’t go to college?
You can change the beneficiary to another family member, including siblings, cousins, or even yourself. 

What if I save too much?
Excess funds can be repurposed. While nonqualified withdrawals are subject to taxes and penalties on earnings, new rollover rules make it easier to keep your money working for your family. 

Are 529s only for parents?
No. Grandparents, relatives, and friends can open or contribute to a 529 plan, making it a powerful tool for family giving. 

Should You Use a 529 Plan? 

A 529 plan is one of the most effective ways to prepare for education costs while also enjoying tax advantages. It is, however, only one piece of your bigger financial picture.

That’s why it matters who you partner with. At PaulHood, we look beyond one-off strategies and support your financial wellness year-round, balancing today’s needs with tomorrow’s goals. Whether you’re saving for education, planning for retirement, or managing taxes, we help keep every part of your financial life working together. Since every family’s situation is unique and state rules can differ, it’s always wise to consult a financial or tax professional before making decisions.

Get Started Today

Take the next step toward securing your family’s future by putting a smart education strategy in place today. If you’re ready to explore how a 529 plan fits into your broader financial goals, our team is here to guide you with clarity and confidence. Contact PaulHood to start building a plan that supports your family for years to come.