This proposal expands what families can pay for with tax-free 529 plan money. It adds many K–12 and homeschool costs—like curriculum, books, online materials, tutoring by qualified instructors, testing fees, dual-enrollment fees, and licensed therapies for students with disabilities. It also makes these uses clearly available to homeschools under state law . The yearly cap for using 529 funds on K–12 and homeschool expenses would rise to $20,000, up from current limits, and this higher cap would start for tax years beginning after December 31, 2026 . In addition, people making gifts to a child’s 529 could exclude up to an extra $20,000 from gift taxes each year, starting after December 31, 2026 .

The bill also ties some tax breaks for government bonds to state school choice policies. Full tax-free bond interest would apply only if the bond is from a state that meets “minimum school choice” standards. States that meet only part of the standard would get a 50% interest exclusion. The standards look at whether the state offers school choice programs (like vouchers, tax-credit scholarships, education savings accounts, or refundable tax credits), how many children are eligible (40% for minimum status; 65% for the higher standard), and how much funding eligible students receive (at least 60% or 75% of what non-eligible students get). These bond rules would apply to bonds issued after the bill becomes law . The new 529 uses would apply to distributions after the bill becomes law .

Key points

• Who is affected: Families using 529 plans; homeschoolers; K–12 students; people gifting to 529s; states and local governments that issue bonds .
• What changes: More allowed 529 expenses for K–12 and homeschool; $20,000 annual 529 K–12 cap; up to $20,000 extra gift tax exclusion for 529 contributions; bond tax breaks limited based on state school choice policies (with a 50% partial break for some states) .
• When: New 529 uses—after enactment; $20,000 K–12 cap and gift-tax change—starting in 2027 tax year; bond rules—bonds issued after enactment .