11 Education Tax Credits and Deductions Available

4. 529 Plan Tax Benefits (Tax-free growth; K–12 limit updated)

529 college savings plans offer tax-free investment growth and tax-free withdrawals for qualified education expenses. Historically focused on higher education, many plans also allow K–12 tuition distributions. According to available research, the K–12 withdrawal limit increased to $20,000 starting in 2026, up from $10,000; verify your plan’s treatment and state tax consequences before using funds. Withdrawals used for qualified expenses—tuition, fees, books, room and board for eligible students—are typically tax-free federally, though some states treat contributions or withdrawals differently. Distributions are reported on Form 1099‑Q. Example: Parents who saved in a 529 and need to cover junior’s college tuition can take tax-free distributions if expenses are qualified, avoiding income tax on earnings. Note that excess nonqualified withdrawals may incur income tax and a penalty on earnings. Check your plan documents and the IRS 529 guidance at https://www.irs.gov/ for details and state tax links.