As homeschooling surges across the U.S., a proposed federal bill promises to ease financial burdens for families by expanding tax-free 529 savings plans to cover curriculum, tutoring, and other expenses, potentially transforming education for millions.
The One Big Beautiful Bill (OBBB), a 2025 budget reconciliation package passed by House Republicans and aligned with President Donald Trump’s agenda, awaits Senate approval. It proposes significant expansions to 529 savings plans, tax-advantaged accounts designed to help families save for education expenses, from college to K-12 schooling.
The bill’s changes target support for the nearly 4 million homeschooled students and families with diverse educational needs, allowing tax-free withdrawals for homeschool expenses, workforce training, and special needs therapies. This offers financial relief and flexibility, particularly for homeschoolers.
Currently, 529 plans provide tax-free growth and withdrawals for qualified expenses, such as college tuition or up to $10,000 annually for private K-12 tuition. However, federal law excludes homeschool expenses unless states classify homeschooling as private schooling, as in Alaska or Texas. Since the COVID-19 pandemic, the number of homeschool students has risen from 2.5 million in 2019 to almost 4 million students currently, with annual costs averaging $1,300 to $1,700 per student. While often more cost-effective than other education options, these expenses can strain family budgets. The OBBB’s expansion would enable homeschool families to use 529 funds tax-free, ensuring they don’t sacrifice quality education for financial reasons.
The bill adds seven new categories of qualified 529 expenses: curriculum, books, online resources, tutoring, educational therapies for students with disabilities, dual enrollment fees for college courses, and exam costs, such as SAT fees. These withdrawals would be tax-free, marking a significant shift from current IRS rules. The bill also makes permanent provisions for tax-free rollovers from 529 plans to ABLE (Achieving a Better Life Experience) accounts, which support disability-related expenses, benefiting families with special needs children.
Additionally, the OBBB expands 529 plan use to cover tuition, books, fees, and supplies for workforce training, on-the-job training, apprenticeships, and non-degree credentials under the Workforce Innovation and Opportunity Act. This supports homeschool students pursuing vocational or alternative educational paths.
The bill also introduces Money Accounts for Growth and Advancement (MAGA), an alternative savings option allowing $5,000 annual contributions for children under age eight, with a one-time $1,000 government contribution for children born between 2025 and 2028. While not directly tied to 529 plans, MAGA accounts offer homeschool and all families another tool for education, home purchases, or small business startups, though with less favorable tax treatment.
For homeschool families, the 529 expansion reduces out-of-pocket costs for curriculum, books, and therapies, easing the burden of funding education while also paying public school taxes. It supports diverse educational paths, such as vocational training and dual enrollment, and corrects the inequity of excluding homeschool expenses compared to private school tuition.
The OBBB, which has undergone several revisions, still requires Senate approval. Some states, like California, may not adopt the new federal rules, so families should check state-specific 529 regulations. Consulting financial advisors is also recommended to navigate potential changes.
The proposed changes align with Republican priorities, emphasizing school choice and parental rights. They could drive increased 529 plan usage, boosting state-administered programs and offering families significant savings.
The 529 expansions hold transformative potential, providing homeschool families with financial and educational flexibility. As the OBBB progresses through Congress, families should monitor its status and consult advisors to prepare for new opportunities. If passed, the bill could make educational dreams more attainable for homeschoolers, one tax-free withdrawal at a time.