President Trump's tax bill expands 529 plans to cover more education expenses

President Donald Trump’s tax bill expands uses for 529 education savings plans, with some limitations still in place. The “One Big Beautiful Bill Act” significantly broadens options for 529 plans, now allowing various costs like test fees and workforce training. State-run 529s offer tax advantages, including tax-free growth and withdrawals for education expenses, with unused money having options like rolling into a Roth IRA.

Despite the benefits, some experts caution that 529s may not be worthwhile for big savers, citing limitations like investment choices and spending restrictions. The OBBB allows tax-free withdrawals for K-12 expenses like curriculum and tutoring, as well as fees for college courses and standardized tests. Beneficiaries can roll unused funds into a Roth IRA or change beneficiaries under certain conditions.

529 plans offer tax-free growth and withdrawals for education expenses, but some drawbacks include limited investment choices and restrictions on spending. Financial advisors suggest using 529 plans in conjunction with other savings vehicles to maximize benefits. While federal tax law doesn’t provide deductions for 529 contributions, some states offer tax incentives that vary by state and require research for the best choice.

Expansions under the OBBB make 529s appealing to a wider range of people, transforming them into a K-Career-Retirement powerhouse. The bill’s provisions, like adding K-12 course materials and home school benefits, offer financial and educational flexibility. The top-ranking Maryland College Investment Plan showed a 10-year average return of 7.04%, slightly below the S&P 500 index average.

Roth IRAs offer tax advantages for education savings, but contributions are capped and there are income limits. Traditional brokerage accounts provide unlimited investment choices, but can reduce financial aid packages. Cash value life insurance policies offer growth guarantees and flexibility, but can be complex. No one savings plan fits everyone, and experienced investors may find better options than a 529 plan.

Read more at Yahoo Finance: ‘One Big Beautiful Bill’ expands 529 plans. But are there better options?