Using a 529 for K-12 Expenses: What's Covered and How It Works

Most families think of a 529 as a college account—something you crack open eighteen years from now when the first tuition bill arrives. But if you are already paying for private school, tutoring, or test prep along the way, a 529 can help right now, and recent changes made it a lot more useful for the K-12 years. Here is what it covers, how to actually use it, and one state-level wrinkle worth knowing about.

What a 529 Covers for K-12 Now

A 529 is a tax-advantaged education account: you contribute after-tax money, the investments grow without being taxed, and withdrawals for qualified expenses come out federally tax-free. If you are new to all this, our guide to what a 529 is covers the basics. Using that money for grade school used to be limited—tuition only, capped at $10,000 a year.

The One Big Beautiful Bill Act, signed in 2025, changed that. Starting in 2026, the annual K-12 limit doubles to $20,000 per child, and the money now covers far more than tuition. Qualified K-12 expenses now include:

• Tuition at a public, private, or religious school

• Curriculum, books, and online instructional materials

• Tutoring by a qualified instructor who is not a relative

• Fees for standardized tests and AP or college-entrance exams, such as the SAT and ACT

• Dual-enrollment fees for college courses taken in high school

• Educational therapies for students with disabilities

That last group matters even if your kids attend public school. Tuition is free, but tutoring, test prep, and exam fees are not—and a 529 can cover those too, along with required books and materials. This is not only a private-school benefit.

How to Use a 529 for K-12 Expenses

Using a 529 for K-12 is simpler than most people expect. You log into your plan and request a withdrawal—what the plan calls a qualified distribution. Most plans give you three choices for where the money goes: pay the school directly, send it to you (the account owner), or send it to the student. Paying the school directly is clean and common, but reimbursing yourself works just as well.

Timing and records are the only things to get right. Take the withdrawal in the same calendar year you pay the expense—that is what keeps it tax-free. And keep proof of what you spent: the tuition invoice, the tutor's bill, the test-registration confirmation. You do not need to file these with your tax return, so this is purely in case you are audited. Keep your records in a folder, digital scans, or even a shoebox, and you are fine. Your plan also sends you a 1099-Q form each year recording what came out.

You can link a 529 inside the Hadley app, even if you are not the account owner.

A Quick Word on State Recapture

One wrinkle before the examples. Federal tax-free treatment is the same everywhere, but a handful of states do not recognize K-12 tuition as a qualified expense on the state return: California, Colorado, Connecticut, Hawaii, Illinois, Michigan, Minnesota, Montana, Nebraska, New Mexico, New York, Oregon, and Vermont. In those states, if you have already taken a state tax deduction on 529 funds on the way in, and you then use the funds to pay for K-12 expenses, the state tax deduction may be recaptured on the way out—and the earnings may be taxed on your state return.

Here is the reassuring part, and the numbers below prove it: even when recapture applies to the full amount, you still come out ahead using a 529, because the federal tax-free growth is yours no matter what your state does.

To see how this works in practice, here are two families in two very different states.

Example 1: Pennsylvania, Where It Just Works

The Marchetti family in Pittsburgh pays $20,000 a year in private-school tuition. Pennsylvania treats K-12 as a qualified 529 expense and offers a state deduction of up to $38,000 per child for married couples, so the Marchettis can do something neat: run the tuition through their Pennsylvania 529 on its way to the school and deduct it, all in the same year.

At Pennsylvania's 3.07% flat income tax, deducting the full $20,000 saves them $614 a year. Across all thirteen grades from kindergarten through senior year, that is roughly $8,000 they simply keep—for doing nothing more than moving tuition through the right account first. If they also fund the account a few years ahead, the growth on that money comes out federally tax-free on top.

Example 2: New York, Where Recapture Applies

Now a family in one of the recapture states. Dana Ellison in Brooklyn funds a 529 for her son with $5,000 a year for twelve years. By the time he is in high school, the account holds about $89,000—roughly $29,000 of it growth. She spends it on his private high school and, being in New York, faces full recapture.

Here is the math, both ways:

• Paying from a taxable account instead: she would owe federal capital-gains tax (15%) plus New York tax (6.25%) on that $29,000 of growth—about $6,250 in tax.

• Paying from the 529, worst-case recapture: federal tax on the growth is zero. New York taxes the earnings at 6.25%, about $1,840, and it unwinds the deductions she took along the way—but she received those same deductions in the first place, so that piece is a wash.

The 529 route costs her about $1,840 where the taxable account cost $6,250. She is still roughly $4,400 ahead after the recapture, because recapture only reaches the state deduction—the federal tax-free growth stays put.

There is a bonus hidden in the recapture scenario. Dana banked that state deduction—about $313 a year—and let it grow at 7% for the twelve years before recapture ever hit, compounding to roughly $5,590. Net of the $3,750 New York eventually reclaims, that is an extra $1,840 in her pocket. In effect, the deduction worked like an interest-free loan from the state: she invested the tax savings for years and paid back only what she had borrowed.

If Dana wants to skip recapture entirely, she can keep her New York plan for college—still fully qualified there—and use an out-of-state plan like Utah's my529 for the K-12 bills. But even if she keeps it simple—paying K-12 straight from her New York 529 and taking the recapture—she still comes out ahead of a taxable account.

The Bottom Line

The 2025 law turned the 529 into a real tool for the school years, not just the college years: $20,000 a year now covers tuition, tutoring, books, and testing, and using it is as simple as requesting a withdrawal and keeping your receipts. Paying those bills from a 529 beats paying them from a regular checking account in every state, because the growth comes out federal-tax-free—and in the dozen-plus recapture states, you still come out ahead, just by a bit less.

Not sure how your state treats K-12 withdrawals? Hadley's Find My 529 tool reads your state's rules, fees, and tax treatment and points you to the plan that fits your family.

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