On July 4, 2025, The One Big Beautiful Bill Act (OBBBA) was codified into law. Among many other impacts on tax and government funding, the enactment of this Bill significantly increased the use of 529 Plans.
Prior to the OBBBA, 529 withdrawals for kindergarten to 12th grade were capped at $10,000 annually and were permitted only for tuition at public, private or religious schools. Not only does the OBBBA double the withdrawal cap to $20,000 annually, but it expands the expenses that qualify under these plans.
Specifically, the expenses go beyond tuition to include standardized test fees, tutoring services, educational therapies for students with disabilities, fees for dual enrollment for higher education courses taken during high school, and curriculum materials, such as textbooks and digital materials. This expansion is particularly valuable to families whose children are receiving specialized education or families who are homeschooling.
While 529 Plans previously covered most college and postgraduate education expenses, the OBBBA now allows 529 plans to be used for credentialing and licensing programs, such as welding, aviation mechanics, and other trade certifications, that are recognized in the Workforce Innovation and Opportunity Act (WIOA) directory or the Web Enabled Approval Management Systems (WEAMS). This includes the tuition itself, along with fees associated with entrance exams, curriculum materials and equipment.
A 529 account can be particularly valuable to parents getting a divorce in New Jersey as such parents would, in most cases, be required to contribute to their children’s college expenses. Contributions to 529 Plans grow tax free, and withdrawals are tax free when used for the qualified expenses discussed above. The expansion of its uses has essentially made 529 Plans more valuable and worth considering whether they should be jointly or individually maintained post-divorce.
If you are getting a divorce and you or your spouse has a 529 plan for your child, it is important you consult with a family law attorney to determine how this plan can be properly considered when addressing issues of equitable distribution and educational expenses.
