How Trump’s 2025 Budget Reconciliation Bill Could Reshape 529 Plans

Saving for college is already a juggling act. Between tuition inflation, financial‐aid rules, and the alphabet soup of education accounts, parents and grandparents have plenty to track. Now Congress is considering the “One, Big, Beautiful Bill,” a budget-reconciliation package that could rewrite some of those rules as early as this summer. 

The bill, backed by House Republicans and aligned with President Donald Trump’s “America First” agenda, proposes the most significant expansion of 529 plan benefits in years and introduces a brand-new Kids’ savings vehicle nicknamed the MAGA account.

Although the legislation still needs to clear the Senate, it has a realistic path to the president’s desk because lawmakers can pass it with a simple majority under reconciliation.

Below is a concise look at what could change, what would stay the same, and how families and financial advisors can prepare while the bill moves through Congress.

529 qualified expenses would cover far more K-12 costs

Today, you can tap up to $10,000 per year for K-12 tuition. The House bill would let families treat seven additional K-12 and homeschool expenses as “qualified higher-education expenses,” meaning 529 withdrawals for these costs would be federal tax-free:

• curriculum and curricular materials
• books and other instructional materials
• online educational materials
• tutoring or educational classes outside the home
• fees for nationally standardized tests (SAT, ACT, AP, etc.)
• dual-enrollment fees for college courses taken in high school
• educational therapies for students with disabilities

These new uses would apply to distributions made after the bill is signed. Keep in mind that not all states currently consider K-12 tuition a qualified expense for state tax purposes. Any expansion of K-12 benefits on the federal level may require new state legislation for similar state tax treatment.

Job-training credentials would become 529-eligible

The proposal also labels a wide range of workforce credentials as qualified expenses, including tuition, fees, books, supplies, and required exam costs for programs that:

• appear on a state or federal Workforce Innovation and Opportunity Act list,
• are listed in the VA’s WEAMS database (which verifies if a school or program is eligible for VA benefits),
• prepare students for an industry-recognized licensing exam, or
• are later approved by the U.S. Department of the Treasury after consulting the Department of Labor.

Continuing-education fees required to keep a credential active would qualify, too. The change would take effect for distributions after enactment.

ABLE-account flexibility would be locked in permanently

The bill would make permanent three ABLE provisions that are currently slated to expire: the expanded “ABLE-to-Work” contribution limit, the Saver’s Credit for ABLE contributions, and tax-free 529-to-ABLE rollovers. Keeping these measures in place preserves an additional tax-advantaged savings path for families with disability-related expenses.

A brand-new “MAGA” kids’ account would launch in 2026

While not a 529, the Money Accounts for Growth and Advancement (MAGA) program could compete for college-savings dollars:

What it means: MAGA accounts could appeal to families who want broad life-stage flexibility and are comfortable paying capital-gains tax on growth. 529 plans would still offer the strongest tax break for pure education funding.

What stays the same (for now)

Although the reconciliation bill would broaden how you can use 529 money, it leaves several core rules untouched.

• No change to federal 529 contribution rules; lifetime caps remain state-specific.
• The existing $10,000 lifetime limit for student-loan repayments and $10,000 per-year K-12 tuition limit are untouched.
• Federal tax treatment of 529 growth and in-state tax deductions/credits remains as is.

Because these fundamentals remain in place, any savings plan that already suits your goals should still work going forward. Think of the bill as adding new options rather than forcing you to rethink everything from scratch.

Action steps for parents, grandparents, and advisors

Legislation can change quickly, but smart savers do not wait for certainty before refining their strategy. While the bill winds its way through Congress, there are practical moves you can make to stay ahead of the curve and position your family or your clients for the most favorable outcome.

1. Keep saving. The bill hasn’t passed the Senate yet, and details could still change. In the meantime, making regular contributions will help you maximize future tax-free growth.
2. Track state conformity. States that piggyback on federal 529 rules may need legislation or guidance before the new expense categories are tax-free at the state level.
3. Review education budgets. If you pay for tutoring, dual-enrollment courses, or credential exams, penciling them into your 529 strategy could unlock additional tax savings.
4. Compare MAGA vs. 529 for newborns. A $1,000 federal seed plus flexible uses may tempt new parents, but losing tax-free growth could outweigh the benefit for long-term college costs.

By taking these steps now and monitoring final Congressional action, you’ll be ready to capitalize on new benefits the moment they become law, all while keeping your existing college-funding roadmap on track.

Timeline to watch

Bottom line

The reconciliation package would meaningfully expand what counts as a qualified 529 withdrawal, especially for K-12 and credentialing expenses, while introducing MAGA accounts as a parallel savings vehicle.

If you’re already using a 529, the bill only sweetens the deal; just be ready to adjust your withdrawal strategy once the new rules are final.