The landscape for 529 college savings plans has changed dramatically with the passage of the 2025 Act, which significantly broadens the definition of qualified expenses. For the first time, families who homeschool their children can use 529 plan funds for a wide range of educational costs, not just tuition. This article outlines the key changes, eligible expenses, compliance requirements, and current guidance for practitioners and families.
Key Legislative Changes
Effective for distributions made after July 4, 2025, the 2025 Act expands the list of qualified higher education expenses (QHEEs) for 529 plans to include a broad array of K–12 expenses, including those incurred by homeschoolers. The annual tax-free distribution limit for K–12 (including homeschool) expenses increases to $20,000 per student beginning in 2026, up from the previous $10,000 cap.
Eligible Homeschool Expenses
Under the new law, the following homeschool expenses are now eligible for tax-free 529 plan distributions, subject to the annual $20,000 limit per beneficiary:
- Curriculum and curricular materials: Core educational content and structured programs used for instruction.
- Books or other instructional materials: Textbooks and other resources required for learning.
- Online educational materials: Digital resources and subscriptions used for instruction.
- Tuition for tutoring or educational classes outside the home: Provided the tutor is not related to the student and is a licensed teacher, has taught at an eligible educational institution, or is a subject matter expert.
- Fees for standardized tests: Including nationally norm-referenced achievement tests, advanced placement exams, and college admission exams (e.g., SAT, ACT, AP exams).
- Fees for dual enrollment: Costs for high school students taking college courses for credit.
- Educational therapies for students with disabilities: Occupational, behavioral, physical, and speech-language therapies provided by licensed or accredited practitioners.
Limitations and Compliance Requirements
- Annual Limit: The $20,000 annual limit applies per beneficiary, not per account. Families with multiple 529 accounts for the same child must ensure total distributions for K–12 expenses do not exceed this cap.
- Qualified Tutoring: Only tutoring by non-relatives who are licensed teachers, subject matter experts, or have taught at eligible institutions qualifies.
- Non-qualified Expenses: Nonathletic supplies for health or physical education courses and certain other non-instructional costs are not eligible.
- Documentation: Families must keep thorough records of all qualified expenses paid with 529 funds, including receipts, invoices, and documentation showing the nature of the expense and that it meets statutory requirements (e.g., proof of tutor qualifications, curriculum materials, test registration).
- IRS Oversight: The IRS may require substantiation and has authority to impose additional recordkeeping or reporting requirements to prevent abuse. Distributions for nonqualified expenses or in excess of the annual limit are subject to income tax and a 10% penalty on the earnings portion.
Current IRS Guidance
As of early 2026, the IRS and Treasury have not issued updated guidance, notices, or FAQs specifically addressing the use of 529 plan funds for homeschool expenses under the expanded QHEE rules of the 2025 Act. The most recent IRS guidance (Notice 2018-58) predates these changes and does not address homeschool expenses or the broader range of K–12 expenses now eligible under the new law. We will monitor developments for future IRS or Treasury guidance clarifying the treatment of homeschool expenses under the revised 529 plan rules.
If you have further questions regarding this expanded 529 Plan coverage, contact your tax advisor or call our office.
Author: Tom Alvarez, CPA, MBT