What is a 529 plan?

A 529 plan (a qualified tuition program under Internal Revenue Code section 529) helps families save for education. You can open an account in any state’s plan, name a student as the beneficiary, and invest after-tax contributions. As long as you use the money for qualified expenses, the IRS does not tax the earnings when you withdraw them.

529s are no longer college-only. In 2026 they can cover a wide set of K–12 costs (up to the annual federal cap), college and vocational school, registered apprenticeships, a limited amount of student loan repayment, and certain career-credential programs.

What changed — and what is already in effect

The One Big Beautiful Bill Act (Public Law 119-21, signed July 4, 2025) expanded 529s in two stages:

• Since July 5, 2025: Qualified K–12 expenses include more than tuition (see the list below). 529 funds can also pay federally qualified postsecondary credentialing expenses, such as approved workforce and licensing programs. Tax-free rollovers from a 529 to an ABLE account are now permanent.
• Since January 1, 2026: The annual federal cap on K–12 529 withdrawals doubled from $10,000 to $20,000 per beneficiary.

Those are the current federal rules for this tax year. California still uses its own, narrower definition of a qualified 529 withdrawal (details below).

Can I use a 529 for Stetson Academy tuition?

Yes, for federal tax purposes. Tuition at a private elementary or secondary school is a qualified K–12 expense. The $20,000 annual federal cap is per student, across all 529 accounts, and it is high enough to cover a typical year of Stetson tuition with room left for other qualified K–12 costs.

For California tax purposes, K–12 tuition is still treated as a non-qualified withdrawal. Only the earnings slice of that withdrawal is generally taxed by California—not the original contributions. If the account is new or mostly principal, the California tax bite is often small; if the account has years of growth, it can be larger. Keep year-end 1099-Q forms and talk with a tax professional before you withdraw.

What K–12 expenses qualify federally in 2026?

Federal law now treats these costs as qualified when they are connected with enrollment or attendance at an elementary or secondary public, private, or religious school, up to $20,000 per student per year:

• Tuition
• Curriculum and curricular materials
• Books or other instructional materials
• Online educational materials
• Tutoring or educational classes outside the home (including at a tutoring facility), only if the tutor is not related to the student and is (1) licensed as a teacher in any state, (2) has taught at an eligible college or university, or (3) is a subject-matter expert in the relevant subject
• Fees for nationally standardized tests, Advanced Placement exams, and college-admission exams (for example SAT or ACT)
• Dual-enrollment fees for college courses taken while in high school
• Educational therapies for students with disabilities provided by a licensed or accredited practitioner, including occupational, behavioral, physical, and speech-language therapies

Items that generally do not count as K–12 529 expenses include transportation, uniforms, school lunches, sports and extracurricular fees, and computers or home internet (those technology costs can qualify for college, not for K–12). Homeschool expenses only fit if they are tied to enrollment or attendance at a qualifying school—confirm with a tax advisor before you withdraw.

How do I withdraw money for school?

• Pay the school or vendor directly. Many 529 plans will send a check or ACH to Stetson Academy or another provider on the student’s behalf.
• Reimburse yourself. Pay first, then withdraw the matching amount to your bank account. Keep invoices, receipts, and the 529 statement for that year.

Time withdrawals for the same calendar year as the expense. The $20,000 K–12 cap is a tax-year limit, not a school-year limit, and it applies to the student—not to each 529 account separately.

California tax treatment

California conforms to the Internal Revenue Code as of January 1, 2025, with several 529 modifications. As of August 2026 the Franchise Tax Board still reports that California does not conform to the federal K–12 expansion or to the $20,000 K–12 cap. In practice:

• No California deduction or credit for putting money into a 529, including California’s own ScholarShare 529 plan.
• K–12 withdrawals: federally tax-free (within the $20,000 cap), but the earnings portion is generally California taxable income plus an additional 2.5% California tax (reported on FTB Form 3805P / Schedule CA).
• College, vocational school, registered apprenticeships, and student-loan repayment (up to the federal $10,000 lifetime cap per borrower) are generally tax-free for both federal and California purposes when they meet the federal definitions.
• Postsecondary credentialing programs added in 2025 are federally qualified; California does not currently treat them as qualified 529 expenses.
• 529-to-Roth IRA rollovers can be federally tax-free if you meet the SECURE 2.0 rules. California does not conform, so the earnings portion can be California taxable and subject to the additional 2.5% tax.

California has not enacted OBBBA 529 conformity as of this review. Bills on related topics have been introduced, but they are not current law. Recheck FTB guidance, or ask your tax preparer, before you file.

Other qualified uses (beyond K–12)

• College and career school: Tuition, fees, books, supplies, required equipment, computers and internet used primarily by a college student, special-needs services, and room and board for students enrolled at least half time.
• Registered apprenticeships: Fees, books, supplies, and equipment for programs registered with the U.S. Department of Labor. ScholarShare treats these as California-qualified as well as federally qualified.
• Student loans: Up to a $10,000 lifetime amount of principal and interest per borrower (the 529 beneficiary or a sibling). This is a lifetime cap, not an annual cap.
• Credential and license programs: Federally, 529 funds can pay tuition, testing, and required continuing education for recognized postsecondary credentials (for example certain WIOA-listed programs, VA WEAMS-listed programs, and many occupational licenses). Confirm the program qualifies, and remember California may still tax the earnings.

What if we do not use all of the money?

• 529 accounts do not expire. You can leave funds invested for later education.
• You can change the beneficiary to another qualifying family member (including a sibling, parent, or first cousin) without it counting as a taxable distribution.
• Unused funds can, in limited cases, roll to an ABLE account for a beneficiary with a disability (now a permanent federal option).
• Under SECURE 2.0, unused 529 money can roll to a Roth IRA owned by the same beneficiary if the 529 has been open at least 15 years, the dollars (and earnings) being moved have been in the account at least 5 years, the beneficiary has earned income at least equal to the rollover, and you stay within the annual Roth contribution limit ($7,500 in 2026, or $8,600 if age 50 or older) and a $35,000 lifetime cap. Regular Roth income limits do not apply to this rollover. California may still tax the earnings, as noted above.
• A non-qualified withdrawal is federally taxable on the earnings, plus a 10% federal additional tax on those earnings (with exceptions such as scholarships, death, or disability). California may also tax the earnings and add its 2.5% tax.

How much can we contribute?

There is no IRS annual “529 contribution limit” like an IRA. Plans cap the account at the amount reasonably needed for education (often several hundred thousand dollars; each plan publishes its own maximum).

Contributions are gifts for federal gift-tax purposes. For 2026 the annual gift-tax exclusion is $19,000 per donor per beneficiary ($38,000 for a married couple who gift-split), the same as 2025. You can also “superfund” a 529 by contributing up to five years of exclusions at once—$95,000 per individual or $190,000 per married couple in 2026— and elect on IRS Form 709 to spread the gift over five years.

Investment direction inside a 529 is limited to twice per calendar year.

How to open a 529

1. Compare plans. You may use any state’s 529. California families often start with ScholarShare 529 (California’s official plan; no contribution deduction, but no sales load). Direct-sold plans from Vanguard, Fidelity, and T. Rowe Price 529 are also common. Compare fees, investment menus, and customer service—not just the state name.
2. Open the account online with your information, the student’s Social Security number, and a funding source.
3. Fund it with a first contribution and, if you can, automatic monthly deposits. Relatives can often gift directly into the account.
4. Pick investments that match when you will need the money. Age-based portfolios are the default for many families paying K–12 bills soon; they usually shift toward cash and bonds as the student gets closer to withdrawals.
5. Review once or twice a year. Rebalance only within the twice-a-year IRS limit, and keep receipts whenever you take a distribution.

Frequently asked questions

Is the $20,000 K–12 limit per account or per child?

Per child, per tax year, from all 529 accounts combined. Two 529s for the same student do not create two $20,000 federal allowances.

Does California’s 2.5% tax apply to the whole withdrawal?

No. It applies to the earnings portion of a withdrawal that California treats as non-qualified (including K–12). Your original contributions come out without that extra tax. Regular California income tax can also apply to those earnings.

Can 529 money pay for Stetson tutoring?

Possibly, if the tutoring is academic, outside the home, the tutor is not related to the student, and the tutor meets one of the federal qualifications (state teaching license, prior teaching at an eligible college, or subject-matter expertise). Do not assume every tutoring arrangement qualifies. Keep documentation and ask a tax professional.

Should we use a 529, an FSA, or both?

They cover different costs. A dependent-care FSA is for care while parents work (before- and after-school programs such as ECP), using pre-tax payroll dollars. A 529 is for education expenses such as tuition. Many families use both. See the FSA guide and the tuition + tax calculator.

Do we have to use California’s ScholarShare plan?

No. 529s are portable. Because California does not deduct contributions, the usual reason to “buy local” is weaker here. Compare fees and funds; ScholarShare is still a reasonable default for many California residents.

Further reading & tools

• Stetson tuition + tax calculator – Illustrates 529 withdrawals with the 2025 ($10,000) and 2026 ($20,000) federal K–12 caps.
• IRS Publication 970, Tax Benefits for Education
• 26 U.S.C. § 529 – Current federal statute, including the K–12 list and credentialing rules.
• ScholarShare 529: how a 529 works (California’s plan, including state-tax footnotes)
• FTB Summary of Federal Income Tax Changes – California nonconformity to the 2025 529 expansions; also see FTB Form 3805P
• SavingforCollege.com – Plan comparisons and 529 FAQs
• College Savings Plans Network