Can You Use 529 for Private School? Annual Cap and Leftover Funds

Yes — you can use a 529 plan for private school tuition, and beginning with the 2026 tax year you can withdraw up to $20,000 per student per year tax-free for a broader list of K-12 costs than tuition alone.¹ That is double the previous $10,000 cap, and the list of qualifying expenses now includes items families used to pay for out of pocket. State tax rules and a few mechanical traps still matter, so the details below are worth reading before you request a distribution.

What K-12 Expenses Qualify

When Congress first opened 529 plans to K-12 costs in 2017, tuition was the only qualifying expense.² The One Big Beautiful Bill Act, signed July 4, 2025, expanded the list starting with the 2026 tax year. Along with tuition, 529 withdrawals can now cover:¹

Textbooks, online educational materials, and instructional supplies
Academic tutoring for K-12 students
Educational therapies for diagnosed learning differences, including conditions like ADHD
Standardized testing fees, including AP exams and college-entrance tests like the SAT
Dual enrollment fees for college courses taken while in K-12
Credentialing and vocational program costs

Homeschool families are now covered too. Structured curricula, educational software, and instructional materials used for formal homeschool instruction qualify beginning in the 2026 tax year.¹ General household supplies or recreational items marketed as educational do not.

Several ordinary school costs still fall outside the definition. Uniforms, transportation, meals, and extracurricular activity fees are not qualifying expenses. A useful test: the expense needs to be tied directly to instruction or academic assessment.

The $20,000 Annual Cap Per Student

Federal law caps tax-free K-12 withdrawals at $20,000 per beneficiary per calendar year, effective for the 2026 tax year.¹ The cap follows the student, not the account. If a grandparent and a parent each own separate 529 accounts for the same child, their combined K-12 withdrawals for that child cannot exceed $20,000 in a single year.² Families with multiple accounts should coordinate.

Going over the cap does not disqualify the whole distribution. Only the excess loses tax-free treatment.³ And the K-12 cap is separate from college spending: if you also have an older child in college, distributions for qualifying higher education costs have no annual dollar limit.

What Happens If a Withdrawal Doesn’t Qualify

Every 529 distribution has two components: your original contributions and the investment earnings. When a withdrawal is non-qualified, or exceeds the $20,000 K-12 cap, only the earnings portion of the non-qualifying amount is taxed. Your contributions return to you tax-free because you already paid income tax on that money.³

Those earnings take two hits: regular federal income tax at your ordinary rate, plus a 10% additional tax.³ The IRS uses a proration formula to figure the taxable share, dividing your qualifying expenses by the total distribution and applying that ratio to the earnings. Some states impose their own additional penalty on top of the federal one.

State Tax Treatment Can Differ From Federal

Federal law and state law do not always agree on what counts as a qualified 529 withdrawal. The federal government has recognized K-12 distributions since 2018, but some states still treat any non-college withdrawal as non-qualified for state tax purposes. In those states, using 529 money for private school tuition may be federally tax-free but state-taxable.

The consequences depend on whether you previously took a state tax deduction or credit for your contributions. If your state offered an upfront break but does not recognize K-12 withdrawals, it may require you to pay that benefit back through a process called recapture. Some states also add a state-level penalty on the earnings.

State rules change often and vary widely. Check with your state’s department of revenue or your plan administrator before you take a K-12 distribution. The mismatch between federal and state treatment is one of the most common sources of surprise tax bills for 529 owners.

How to Request the Distribution

Most plan administrators handle distribution requests through an online portal. You will typically need the school’s name and address, the student’s enrollment information, and an invoice or billing statement showing the tuition amount. That invoice is your primary documentation if the IRS ever asks.

You choose who receives the funds: the school directly, the student, or the account owner. Paying the school directly simplifies recordkeeping, but the other two options are equally valid as long as the money goes to qualifying expenses. You also select the tax year the distribution applies to, which matters for accurate reporting.

After the withdrawal processes, the plan administrator sends Form 1099-Q the following January, showing the gross distribution and the earnings portion.⁴ Hold onto your school invoices, payment receipts, and any refund documentation along with the 1099-Q.

If the School Refunds Tuition

If a school refunds tuition you paid with 529 funds — say the student withdraws mid-semester — you have 60 days from the refund date to redeposit the money into a 529 account for the same beneficiary. Meet that deadline, and don’t recontribute more than the refunded amount, and the original withdrawal keeps its tax-free treatment.⁵ Miss the 60-day window, and the earnings portion becomes taxable as a non-qualified withdrawal, with the same 10% additional tax. The IRS does not grant extensions.

What to Do With Money Left Over

You can change the designated beneficiary to another family member at any time with no tax consequences, or roll funds from one child’s 529 into a sibling’s plan without triggering taxes or penalties.⁶ Each beneficiary has their own $20,000 annual K-12 cap. You cannot game the cap by switching the beneficiary back and forth: the IRS looks at total distributions per beneficiary per calendar year, regardless of when the designation changed.

The SECURE 2.0 Act also opened a path to move unused 529 money into the beneficiary’s Roth IRA for distributions made after December 31, 2023.⁷ Several conditions apply:

$35,000 lifetime cap per individual on total 529-to-Roth rollovers
The 529 account must have been open more than 15 years
Each year’s rollover cannot exceed the Roth IRA annual contribution limit, which is $7,500 for 2026⁸
Contributions made in the five years before the distribution date cannot be rolled over

The rollover goes into the beneficiary’s own Roth IRA, not the account owner’s. At the current annual pace, moving the full $35,000 would take roughly five years.⁷

1
Congress.gov. H.R. 1 – 119th Congress – One Big Beautiful Bill Act
2
Internal Revenue Service. Tax Benefits for Education: Information Center
3
Office of the Law Revision Counsel. 26 U.S. Code 529 – Qualified Tuition Programs
4
Internal Revenue Service. Instructions for Form 1099-Q
5
Internal Revenue Service. Guidance on Recontributions, Rollovers and Qualified Higher Education Expenses Under Section 529 – Notice 2018-58
6
Internal Revenue Service. 529 Plans: Questions and Answers
7
Internal Revenue Service. Publication 590-A, Contributions to Individual Retirement Arrangements
8
Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026; IRA Limit Increases to $7,500