Can 529 Be Used for Private K-12?

A 529 plan serves as a tax-advantaged savings vehicle designed primarily to help families save for future education expenses. These plans are sponsored by states or educational institutions and offer benefits such as tax-free growth of earnings and tax-free withdrawals when funds are used for qualified education expenses. The funds within a 529 plan can be invested in various portfolios, allowing the savings to potentially grow over time.

Qualified K-12 Education Expenses

Under federal law, 529 plans can be used for qualified elementary and secondary school tuition expenses. This expansion allows families to use these tax-advantaged accounts to cover tuition costs for public, private, or religious K-12 schools.

A qualified K-12 education expense federally refers to tuition expenses incurred in connection with enrollment or attendance at an eligible elementary or secondary school. There is an annual federal limit of $10,000 per student that can be withdrawn tax-free from 529 plans for K-12 tuition. This $10,000 limit applies per beneficiary per year. As of July 2025, the definition of qualified K-12 expenses has broadened to include items beyond tuition. These include:

• Curricular materials
• Books
• Online educational materials
• Tutoring
• Certain testing fees

This definition will broaden to a $20,000 limit in 2026.

Expenses generally not considered qualified K-12 expenses for 529 plans include uniforms, transportation, extracurricular activities, and homeschooling costs. The focus remains on tuition and directly related educational materials and services. Families should ensure that any expenses they plan to cover with 529 funds align with the federal and state definitions of qualified K-12 expenses to avoid potential tax implications.

Withdrawal Process and Tax Implications

Initiating a withdrawal from a 529 plan for K-12 tuition involves contacting the plan administrator. The account holder specifies the amount needed and indicates that the withdrawal is for K-12 tuition. Disbursement options include direct payment to the educational institution or reimbursement to the account owner or beneficiary. Account holders must retain records, such as tuition statements and payment receipts, to substantiate qualified expenses for tax purposes.

At the federal level, qualified withdrawals from a 529 plan for K-12 tuition, up to the $10,000 annual limit per student, are income tax-free. If withdrawals exceed the $10,000 annual limit or are used for non-qualified expenses, the earnings portion of that distribution becomes subject to federal income tax and a 10% federal penalty. The original contributions, as they were made with after-tax dollars, are not subject to tax or penalty upon withdrawal.

State tax implications for 529 plan withdrawals for K-12 tuition vary by state. While federal law permits tax-free withdrawals, some states may not conform to the federal rules. In states that do not conform, withdrawals for K-12 tuition may be treated as non-qualified at the state level, subjecting the earnings to state income tax. Furthermore, some states may require the recapture of state tax deductions or credits previously taken for contributions to the 529 plan if the funds are later used for K-12 tuition. Account holders should consult their state’s 529 plan rules and tax laws.

Strategic Considerations for K-12 Use

Utilizing 529 funds for K-12 tuition requires careful consideration of its impact on future college savings. Drawing funds for elementary or secondary education reduces the amount available for higher education expenses, potentially affecting the overall growth of the account over time. Families should weigh the immediate benefit of covering K-12 tuition against the long-term goal of saving for college. This decision involves assessing current financial needs versus future educational funding requirements.

The use of 529 plans can have an impact on financial aid eligibility for higher education, though often less than commonly perceived. For dependent students, 529 plans owned by parents are generally considered parental assets, which are assessed at a relatively low rate in federal financial aid calculations (a maximum of 5.64% of the asset’s value). Using 529 funds for K-12 tuition means fewer assets in the plan for college, which could marginally alter future financial aid eligibility. However, the benefits of tax-free growth and withdrawals often outweigh this minor impact.

Managing the $10,000 annual federal limit for K-12 tuition withdrawals requires careful planning, especially if annual tuition exceeds this amount. Families may need to cover the difference from other sources or spread payments across multiple years if feasible. Meticulous record-keeping is paramount for all K-12 tuition payments and corresponding 529 withdrawals. This documentation is necessary to demonstrate compliance with IRS rules and to accurately report qualified expenses during tax filing.