Sponsors (9)
The bill expands tax-advantaged 529 uses to make K–12 education, college-prep, and certain therapies more affordable for families (including students with disabilities), but it risks diverting funds away from college, widening benefits toward those who already saved in 529s, and raising equity and administrative oversight concerns.
Parents and students can use 529 accounts to pay K–12 tuition, tutoring, online materials, AP/college-admission exam fees, and dual-enrollment costs, reducing out-of-pocket K–12 and college-prep expenses and potentially increasing college readiness and access.
Students with disabilities can use 529 distributions tax-free to pay for occupational, behavioral, physical, and speech-language therapies provided by licensed/accredited practitioners, lowering treatment costs and improving access to needed services.
Families who spend 529 funds on K–12 expenses may have less saved for higher education, reducing the amount available to pay college costs and potentially increasing future college costs for those students.
Households without 529 accounts receive no direct benefit from the change, risking increased inequality because only families that previously saved in 529s gain expanded tax-advantaged support for K–12 needs.
Allowing 529 funds to cover private or religious school tuition effectively extends federal tax preferences to private education, raising equity concerns and potential political pressure that could affect public-school funding debates.
Based on analysis of 2 sections of legislative text.
Introduced January 20, 2025 by Rafael Edward Cruz · Last progress January 20, 2025
Expands tax-advantaged 529 plan uses to cover a broad set of K–12 expenses so families can withdraw money tax-free for many elementary and secondary education costs. Covered items include tuition for public, private, and religious schools; curriculum and instructional materials; certain tutoring; testing and AP/college exam fees; dual-enrollment fees; and licensed educational therapies for students with disabilities. The change is made by amending federal rules for 529 plans and applies to distributions made after the date of enactment. It alters federal tax treatment (allowing more tax-free distributions) but does not authorize new spending or create a federal program beyond the tax code change.