Can 529 Plans Be Used for High School?

A 529 plan is a tax-advantaged savings account traditionally used for future college and postsecondary training costs. The funds in these accounts grow over time and can be withdrawn tax-free for qualified education expenses. Recent changes in federal law have expanded the utility of these plans, allowing them to be used for high school expenses. While this is permitted, the rules governing these withdrawals are specific. Federal legislation has broadened the definition of qualified expenses to include elementary and secondary school tuition, but state tax laws may differ.

Federal Rules for High School Withdrawals

The Tax Cuts and Jobs Act of 2017 allows for the use of 529 plans for K-12 education. Under this federal rule, an account owner can withdraw up to $10,000 per year, per beneficiary, to pay for tuition at an elementary or secondary school. These withdrawals are qualified distributions, meaning the earnings portion is not subject to federal income tax or the standard 10% penalty.

This provision applies specifically to tuition. Unlike the broader range of qualified expenses for college, the K-12 allowance does not include fees, books, or room and board. Using the funds for any other high school-related expense would make the withdrawal non-qualified, subjecting the earnings to income tax and a penalty.

The $10,000 limit is on a per-student basis, not per-account. If a student is the beneficiary of multiple 529 accounts, the total amount withdrawn from all accounts for their K-12 tuition cannot exceed $10,000 in a single year to maintain tax-free status.

State-Level Tax Implications

While the federal government permits tax-free withdrawals for high school tuition, state tax treatment varies. Not all states conform to the updated federal definition of a qualified expense, which can create state-level tax consequences. In states that do not conform, a distribution for K-12 tuition is considered non-qualified. This means the earnings portion of the withdrawal is subject to state income tax and potentially a state-level penalty.

A more complex issue arises for account owners who previously claimed a state income tax deduction or credit for their 529 plan contributions. In many non-conforming states, using the funds for K-12 tuition can trigger a “recapture” of those prior tax benefits. This requires the account owner to pay back the tax savings they received on contributions now used for an expense the state does not recognize.

For example, if an individual deducted $5,000 in contributions and later withdrew those funds for high school tuition, the state may add that $5,000 back to their taxable income. Account owners should verify their specific state’s rules by checking with the 529 plan administrator or a tax professional.

How to Make a Qualified Withdrawal

Most 529 plans offer several methods for requesting a distribution, such as through an online account portal or by submitting a distribution request form. When making a request, you can have the funds paid directly to the account owner or the educational institution. Sending the payment directly to the high school is often the simplest method for record-keeping, as it creates a clear link between the withdrawal and the qualified expense.

If the payment is made to the account owner, they are responsible for paying the school and maintaining records. The withdrawal amount cannot exceed the actual cost of tuition. The IRS requires that withdrawals be matched with qualified expenses in the same tax year, so meticulous record-keeping is necessary. You should retain all tuition invoices and proof of payment in case of an audit.

Impact on Future College Savings

Using a 529 plan for high school tuition involves a financial trade-off related to compound growth. While it provides immediate relief, it reduces the principal amount that can grow tax-deferred for future college expenses. The money withdrawn represents not just the principal but also the future growth that sum would have generated.

Withdrawing $10,000 for a student’s freshman year of high school means that sum is no longer invested. This decision directly impacts the funds available when the beneficiary is ready for college, a period where expenses are typically much higher.

Recent federal changes have provided new flexibility for unused funds. As of 2024, beneficiaries can roll over leftover 529 funds to a Roth IRA tax-free, subject to a lifetime maximum of $35,000 and other conditions. This option can reduce concerns about over-saving and may make using some funds for K-12 a more attractive strategy for some families.