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Saving for K-12 education with a 529 plan

Originally published by Raymond James.

Learn about using 529 plans for more than just college savings.

529 plans were originally established to help families pay for qualified higher education expenses by offering tax-deferred investment growth and tax-free withdrawals. In 2017, federal tax legislation changed how these accounts can be used. Though individual states may have variations in how they treat these adjustments, one of the most impactful changes is that families can now pay tuition for primary and secondary education using the funds in a 529 plan.

Paying for primary & secondary school

Families can use 529 plans to save and pay for tuition at private, public and religious elementary and secondary schools. The expansion of the “qualified higher education expenses” language means that families can distribute up to $10,000 (per year, per beneficiary) in connection with enrollment or attendance at these primary and secondary schools.

With the average annual cost of private school tuition at $12,241, according to Private School Review, that $10,000 annual withdrawal could make a clear impact on your family’s education expenditures.

K-12 qualified expenses

It’s important to note that tuition is currently the only qualified K-12 use for 529 funds. While the cost of books, computers and other school-related supplies are qualified for post-secondary students, those expenses don’t receive the same tax-advantaged status for primary or secondary students. Similarly, homeschooling expenses and other at-home learning costs aren’t qualified for K-12 students.

Variations by state & plan

At this time, residents of 23 states are eligible for an income tax deduction or credit for 529 plan contributions used to pay for college or K-12 tuition, subject to variation depending on where you live and how much you contribute. And not all states are on the same page – in some states, 529 plan distributions used for K-12 expenses may still be taxable at the state level. Please consult with your tax advisor to best determine how each state may be treating the expenses associated with K-12 education.


Earnings in 529 plans are not subject to federal tax and in most cases state tax, as long as you use withdrawals for eligible college expenses, such as tuition and room and board. However, if you withdraw money from a 529 plan and do not use it on an eligible college expense, you generally will be subject to income tax and an additional 10% federal tax penalty on earnings. As with other investments, there are generally fees and expenses associated with participation in a 529 plan. There is also a risk that these plans may lose money or not perform well enough to cover college costs as anticipated. Most states offer their own 529 programs, which may provide advantages and benefits exclusively for their residents. Investors should consider, before investing, whether the investor’s or the designated beneficiary’s home state offers any tax or other benefits that are only available for investment in such state’s 529 college savings plan. Such benefits include financial aid, scholarship funds, and protection from creditors. The tax implications can vary significantly from state to state.

Raymond James and its advisors do not offer tax advice. You should discuss any tax matters with the appropriate professional.


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