Sponsors (2)
The bill immediately allows 529 funds to cover transportation and parking—making travel to education and apprenticeships more affordable and reducing planning uncertainty—while creating a trade-off of reduced funds available for tuition for some families, potential unreimbursed costs if institutional caps are low, and a small hit to tax receipts.
Parents, families, college students, and apprentices can use 529 plan funds to pay for transportation and parking for attendance or participation, lowering out-of-pocket travel costs and reducing a barrier to vocational/apprenticeship training.
Taxpayers and families gain clearer rules because the bill clarifies taxable treatment and explicitly expands permissible 529 distributions for transportation/parking effective for post-enactment distributions, reducing uncertainty in financial planning.
Parents and students using 529 funds for transportation may have less money available for tuition, fees, or other qualified education costs, shifting the burden of those costs elsewhere.
Families may still face unreimbursed travel expenses because the allowable reimbursement is capped by each institution's cost-of-attendance transportation allowance, which can be lower than actual transportation and parking costs.
Broadening tax-advantaged uses of 529 plans to include transportation and parking will slightly reduce future federal tax revenues compared with the prior, narrower rules.
Based on analysis of 2 sections of legislative text.
Allows 529 plan distributions to pay reasonable transportation and parking costs up to the institution's cost-of-attendance transportation allowance (as of enactment).
Official title: To amend the Internal Revenue Code of 1986 to permit qualified distributions from section 529 plans for certain transportation and parking expenses.
Introduced May 23, 2025 by Jennifer McClellan · Last progress May 23, 2025
Allows 529 plan distributions to pay for reasonable transportation costs, including parking, for students attending eligible colleges and for qualified apprenticeships, up to the transportation allowance listed in the school's cost of attendance. The change applies to distributions made after the law is enacted and uses the institution's cost-of-attendance transportation allowance in effect on the date of enactment as the cap.