Many families across the country save with Ohio 529 because they know it’s the smart, tax-advantaged way to save for their children’s or grandchildren’s education after high school. In the 30 years since 529s were enacted by the IRS Code 529, the lists of qualified higher education expenses that these accounts can cover with a tax-free withdrawal have expanded significantly.
Student loan repayment
One of the newer, and lesser-known qualified distributions from a 529 account is for student loan repayment.
Now, a tax-free 529 withdrawal can be used to pay principal and interest on certain qualified education loans for the beneficiary of your account or any of the beneficiary’s siblings. The student loan repayment provisions apply to repayments up to $10,000 per individual. This $10,000 is a lifetime amount, not an annual limit. Withdrawals for student loan repayment can only be made to the 529 account owner or the beneficiary of the 529 account.
Other qualified higher education expenses
The growing list of qualified distributions that can be paid tax-free with a 529 includes many qualified higher education expenses, and related costs, such as:
- Tuition.
- Room and board during any academic period in which the 529 beneficiary is enrolled for at least half of the full-time academic workload according to the eligible education institution. Room and board costs can also include rent for off-campus residency —including apartments, homes, and Greek fraternities and sororities houses — and groceries (non-taxable items only), provided these costs are equal or less than the same room and board allowances from the accredited education institution.
- Mandatory fees.
- Computer equipment and related technology as well as internet services.
- Books, supplies, and equipment related to enrollment and class schedule.
- Certain expenses for a special-needs student.
- Qualified apprenticeship costs such as fees, textbooks, supplies, and equipment like required trade tools. The apprenticeship program must be registered with the Secretary of Labor’s National Apprenticeships Act to use a 529 plan withdrawal. Interested parties can check the U.S. Labor Department’s search tool to confirm that a program is registered, and therefore, eligible for a 529 withdrawal.
And that is just the start of the qualified higher education expenses for which a tax-free withdrawal from a 529 account can be made. Here are some additional qualified uses.
K-12 Expenses
529 plans can also pay for certain costs from kindergarten through senior year of high school. In 2018, the federal government added a new 529 qualified expense of $10,000 per child, per year, to be used just for K-12 tuition at public, private, or religious elementary or secondary schools. So, parents could now make a tax-free withdrawal from a 529 account to pay for this K-12 expense.
In 2026, the limit was increased to $20,000 per child, per year, and the tuition-only mandate was removed. New 529 qualified distributions were added, including:
- Curriculum and curricular materials.
- Books or other instructional materials.
- Online educational materials.
- Tuition for tutoring or educational classes outside of the home, but only if the tutor or instructor is not related to the student and is licensed as a teacher in any state, has taught at an eligible educational institution, or is a subject matter expert in the relevant subject.
- Fees for a certain nationally standardized achievement test, advanced placement exam, or college admission exam (e.g. SAT, ACT) tests.
- Fees for dual enrollment in an institution of higher education.
- Certain educational therapies for students with disabilities (e.g. occupational, behavioral, speech-language).
Roth IRA rollover
For families who have wondered what will happen to the 529 account if their child doesn’t go to college, this qualified withdrawal went into effect in 2024 to quell any concerns.
Any remaining 529 funds can be rolled over to a Roth IRA for the same beneficiary as the original account. So, if 529 beneficiary doesn’t use all the funds in the account, any remaining 529 funds can jump-start their retirement savings.
The 529 account must meet some requirements to use this new qualified distribution:
- The 529 account must be open for the beneficiary for 15 years.
- The Roth IRA must be for the same beneficiary of the 529 account.
- Contributions—also called the principal—must have been in 529 account for at least five years before the Roth IRA rollover.
- 529 funds can only be rolled over to the yearly Roth IRA contribution limit, which is $7,500 for 2026.
- The lifetime maximum 529 amount allowed for the Roth IRA rollover is $35,000.
- Unused 529 funds (subject to the requirements listed below) to roll over to a Roth IRA for the same 529 beneficiary without incurring any penalty on the earnings. There are some requirements to use this new qualified distribution. First, a 529 account must be open for the beneficiary for 15 years. Second, the Roth IRA must be for the same beneficiary of the 529 account. Third, your contribution, also called the principal, must have been in your Ohio 529 account for at least five years before the Roth IRA rollover. Fourth, you can only roll over 529 funds up to the yearly Roth IRA contribution limit. Fifth, the lifetime maximum 529 amount allowed for the Roth IRA rollover is $35,000. There are still many clarifications and operational issues that will need to be resolved relating to this recent change.
Not just for college
There’s are over 30,000 institutions of higher education where a 529 account can pay for qualified higher education expenses. Four-year colleges and universities are just one option for an education after high school. The savings in a 529 account can also be used at two-year community colleges, trade/technical/vocational schools, credential or certificate programs, as well as apprenticeships verified by the U.S. Department of Labor. Funds in a 529 account can also pay for qualified graduate school expenses. 529 accounts can be used at any higher education institution nationwide if that institute has a School Code listed with the Federal Application for Free Student Aid (FAFSA).
Since 1989, Ohio 529 CollegeAdvantage has been helping families nationwide save for their children and grandchildren’s education after high school, while enjoying the advantages of tax-free earning, tax-free withdrawals, and a state income tax deduction for Ohio residents. Learn, plan, and start for as little as $25 today at CollegeAdvantage.
