Which States Allow 529 for Private School?

A 529 plan is a tax-advantaged savings and investment vehicle designed to help individuals save for future education costs. These state-sponsored plans offer benefits like tax-deferred growth and, under certain conditions, tax-free withdrawals for qualified education expenses. While traditionally for higher education, 529 plans expanded to include K-12 private school tuition. This federal change made them a more versatile tool for educational pursuits. Understanding federal and state regulations for this expanded use is important for families.

Federal Rules for 529 Plan K-12 Private School Use

The Tax Cuts and Jobs Act of 2017 (TCJA) broadened the definition of “qualified education expenses” to include K-12 private school tuition. This federal legislation allows for tax-free withdrawals of up to $10,000 per year per beneficiary for K-12 tuition expenses, effective January 1, 2018. This annual limit applies per student, allowing families with multiple children to utilize this benefit for each child.

Beginning July 4, 2025, the federal definition of qualified K-12 expenses expanded beyond tuition. It now includes curriculum materials, books, tutoring services, online educational materials, testing fees, dual enrollment fees, and certain educational therapies. The annual federal limit for all K-12 expenses is currently $10,000 per beneficiary, increasing to $20,000 per year starting January 1, 2026.

State Tax Treatment of 529 Plan K-12 Withdrawals

While federal law permits tax-free withdrawals from 529 plans for K-12 tuition and other qualified expenses, state tax treatment varies considerably. Each state determines how it applies these federal changes to its own tax code. This means a federally qualified withdrawal might not receive the same favorable tax treatment at the state level.

Some states conform with federal law, treating K-12 tuition withdrawals as qualified expenses for state income tax purposes. In these states, withdrawals for K-12 tuition are exempt from state income tax, aligning with the federal approach. This conformity may also extend to state tax benefits for contributions, such as deductions or credits. Residents of these states can receive both federal and state tax advantages.

Conversely, many states have not conformed to the federal expansion for K-12 tuition. In these non-conforming states, withdrawals for K-12 tuition may be considered non-qualified at the state level. The earnings portion of such a withdrawal may become subject to state income tax. Additionally, some non-conforming states may require the recapture of previously claimed state tax deductions or credits on contributions. This means if a state tax deduction was received for contributions, and funds are used for K-12 tuition in a non-conforming state, the state might claw back that tax benefit. Account owners in non-conforming states should carefully assess potential state tax consequences before making K-12 withdrawals.

States that do not impose a state income tax are a separate category. In these states, state conformity to federal 529 plan rules for K-12 tuition is not an income tax concern. Residents still benefit from the federal tax-free nature of qualified K-12 withdrawals. However, these states offer no state income tax deductions or credits for 529 plan contributions. Federal rules regarding qualified expenses and withdrawal limits still apply universally to all 529 plans.

Eligible K-12 Expenses for 529 Plans

The types of K-12 expenses that qualify for tax-free 529 plan withdrawals are specifically defined. Federally, the primary qualified expense was tuition for public, private, or religious elementary and secondary schools. Prior to recent changes, many other common K-12 costs were not considered qualified expenses for 529 plan purposes. These included items such as school uniforms, transportation costs, general school supplies, and extracurricular activities. This distinction is important because for higher education, 529 plans typically cover a broader range of expenses, including room and board, books, supplies, and certain equipment like computers.

As of July 4, 2025, the federal definition of qualified K-12 expenses expanded significantly beyond tuition. Funds can now be used tax-free for:
Curriculum and curricular materials
Books or other instructional materials
Online educational materials
Tutoring services (provided the tutor meets specific criteria and is not related to the student)
Fees for nationally standardized achievement tests
Advanced Placement (AP) exams
College admissions exams (like SAT, ACT)
Dual enrollment in higher education institutions
Certain educational therapies for students with disabilities

Withdrawing Funds for K-12 Private School Tuition

Withdrawing funds from a 529 plan for K-12 private school tuition involves specific steps to ensure the distribution remains tax-free. Account owners typically initiate a withdrawal request through their 529 plan administrator, often via an online portal or by submitting a form. During this process, the account owner must specify the purpose of the withdrawal as K-12 education.

Funds are frequently sent directly to the account owner for reimbursement of expenses already paid, or in some cases, directly to the educational institution. Confirm the plan’s specific options for disbursement, as some plans may have restrictions on sending funds directly to K-12 schools or to the beneficiary. Meticulous record-keeping is essential; retain all documentation like tuition invoices, school statements, and receipts for at least three years in case the Internal Revenue Service (IRS) requests proof of qualified expenses.

A key consideration for withdrawals is timing: the distribution should occur within the same calendar year that the qualified K-12 expenses are incurred. For example, if tuition is paid in August 2025, the corresponding 529 withdrawal should also be made in 2025. This alignment helps ensure compliance with tax regulations and avoids issues where a withdrawal might be considered non-qualified due to mismatched reporting years.