529 Plan Calculator

A "qualified tuition program" under IRC §529, sponsored by a state (or eligible institution) and operated by a private investment manager. Contributions are AFTER-TAX (no federal deduction), but earnings grow TAX-DEFERRED, and withdrawals for qualified education expenses are FEDERALLY TAX-FREE (§529(c)(3)). Two types: (1) SAVINGS PLAN — investment account holding mutual funds (like a 401k), value tied to market performance. (2) PREPAID TUITION PLAN — lock today's tuition rates at a state's public colleges (only a few states still offer; backed by state appropriations).

Per IRC §529(e)(3): TUITION + REQUIRED FEES at any eligible institution (most accredited colleges/universities + many trade schools — search "529 eligible institution" + school name). BOOKS + SUPPLIES + EQUIPMENT required for enrollment. ROOM AND BOARD if student is at least HALF-TIME (capped at the school's published cost-of-attendance for that category). COMPUTERS, software, internet access (SECURE Act 2019 made this permanent). STUDENT LOAN REPAYMENT — up to $10,000 LIFETIME per beneficiary AND $10,000 LIFETIME per sibling (SECURE Act §302). APPRENTICESHIP fees, books, supplies for DOL-registered apprenticeships (SECURE Act §303).

OBBBA §70804 (P.L. 119-1, July 2025) DOUBLED the K-12 annual withdrawal cap from $10,000 to $20,000 per beneficiary, effective for distributions in tax years 2026 and later. K-12 use was originally added by TCJA in 2018 — limited to $10,000/year for elementary and secondary school tuition at private/religious/public/homeschool. OBBBA also EXPANDED qualifying K-12 expenses beyond tuition to include curriculum materials, books, tutoring, online education materials, fees for standardized tests (SAT/ACT/AP/CLEP), dual-enrollment college fees, and educational therapies for special-needs students. Big practical impact: a parent can now run $20k/year of K-12 private school tuition through the 529, capturing state tax deduction in the 36+ states that allow it.

SECURE 2.0 Act §126 (effective 2024) lets a 529 beneficiary roll over up to $35,000 LIFETIME from the 529 to the BENEFICIARY'S Roth IRA. Three hard requirements: (1) the 529 must be at least 15 YEARS old; (2) contributions and earnings being rolled over must be in the account at least 5 years; (3) the annual rollover is capped at the IRA contribution limit ($7,000 for 2025 / $8,000 if 50+), subject to the beneficiary's own earned income — so a full $35k rollover takes ~5+ years. Big win: prevents 529 "overfunding" risk — leftover balances now have a tax-advantaged escape valve. Many wealthy parents now strategically OVER-fund a 529 specifically to fund the kid's first Roth.

NO federal annual contribution limit. State plans have LIFETIME beneficiary caps ranging from ~$235,000 (LA, MS, GA) to $550,000+ (CA, MA, NY). Once the beneficiary's account hits the cap, no further contributions accepted (earnings can continue accumulating). Gift-tax-wise: contributions above $19,000 per donee per year (2025) trigger Form 709 — but the §529(c)(2)(B) "superfund" election lets you front-load 5 years at once: $95,000 per donor per beneficiary in 2025, or $190,000 from a married couple electing gift-splitting. The 5-year election locks both donors out of further annual-exclusion gifts to that beneficiary during 2025-2029.

Non-qualified withdrawals are taxed under §529(c)(3)(A): the EARNINGS portion (not contributions) is taxed as ORDINARY income to the recipient (the account holder for most withdrawals; the beneficiary if the withdrawal is sent to them), PLUS a 10% federal penalty under §529(c)(6). Earnings are pro-rated — if your account is 70% contributions / 30% earnings, $1,000 non-qualified withdrawal = $300 of taxable earnings → tax + $30 penalty. Three penalty exceptions (§529(c)(6)(C)): (1) beneficiary's scholarship — penalty-free up to scholarship amount; (2) beneficiary attends military academy — penalty-free; (3) beneficiary dies or becomes disabled. State tax recapture of any prior state-deduction often applies on non-qualified withdrawals.

34 states + DC offer a state-income-tax deduction or credit for 529 contributions. 28 require IN-STATE plan use (e.g., NY $5k/$10k deduction only for NY 529); 6 are PARITY states allowing any state's plan (AZ, AR, KS, MN, MO, MT, PA). Four states use CREDITS (more valuable than a deduction): IN (20% up to $1,500), OR (8.85-12% up to $300/$600), UT (4.95% up to $2,580/$5,160), VT (10% up to $250/$500). California, North Carolina, Hawaii, New Hampshire offer NO state tax break. Max deduction: NJ $10k/year, MA/PA $14-17k/year, IL $10k/$20k single/MFJ. Combined with the federal tax-free growth, state deduction is often worth 5-10% of contribution per year.

Four exit options (in order of preference): (1) CHANGE BENEFICIARY to a §529(e)(2) "qualified family member" — sibling, parent, first cousin, in-law, spouse of any of those. No tax, no penalty. (2) Use for grad school for original beneficiary — no time limit on use. (3) SECURE 2.0 §126 ROLLOVER to beneficiary's Roth IRA — up to $35k lifetime, 15-year account seasoning required. (4) NON-QUALIFIED WITHDRAWAL — earnings taxed + 10% penalty (waived for scholarships up to scholarship amount). Account-owner change is also allowed (e.g., grandparent to parent) — useful for FAFSA optimization since parent-owned 529 hits aid formula less than grandparent-owned distributions.

On the FAFSA, a PARENT-OWNED 529 counts as a parental asset assessed at 5.64% in the SAI (Student Aid Index) — meaning $50k in 529 reduces aid by ~$2,820/year. STUDENT-OWNED 529 (rare — most are parent-owned) is assessed at 20%. GRANDPARENT-OWNED 529 used to be ignored at the asset stage but distributions counted as student income at 50% — until the FAFSA Simplification Act (2024-25 award year onward) removed the income hit entirely. Grandparent-owned 529s now optimal for high-income grandparent who wants to give without hurting aid. CSS Profile (private colleges) still considers grandparent assets and distributions.

Yes — §529(c)(3)(C)(i) allows one tax-free rollover per beneficiary per 12-month period from one 529 plan to another (same beneficiary). Useful if you move states (chase better tax deduction), if a plan's investment performance lags, or if expense ratios are high. Be aware: many states RECAPTURE prior state-tax deductions if you roll out of state. NY recaptures any deduction taken in the year of rollover; IL recaptures the past 7 years. Internal investment option changes (e.g., switching from age-based to static portfolio) are limited to twice per year per beneficiary under §529(c)(4)(C).

A Coverdell Education Savings Account (§530) is a parallel tax-advantaged education-savings vehicle, but with three big disadvantages vs 529 in 2025: (1) ANNUAL CAP only $2,000 per beneficiary across all contributors; (2) MAGI PHASE-OUT ($95k-$110k single, $190k-$220k MFJ) bars high-earners; (3) MUST be distributed by beneficiary's age 30 (with limited exceptions for special-needs). Coverdell DOES have ONE advantage: broader investment options (any brokerage product, not just preset mutual funds). For most families the 529 wins on cap, lack of income phase-out, and post-TCJA K-12 use; Coverdell is mostly a legacy account.