The New Uses for 529 Plans: Education, Retirement, and Legacy Planning Reimagined

Protecting and Preserving Wealth Episode 79 – The New Uses for 529 Plans

Speakers: Jon Gay, Bruce Hosler, Jason Hosler, & Alex Koury

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Jon Gay (00:05):

Welcome back to Protecting and Preserving Wealth. I’m Jon Jag Gay, I’m joined as always by Bruce Hosler, Jason Hosler, and Alex Koury of Hosler Wealth Management. Hello, gentlemen.

Bruce Hosler (00:12):

Gentlemen, good morning.

Jason Hosler (00:15):

Hi there, Jon.

Alex Koury (00:15):

Good morning, Jon. Good to see you.

Jon Gay (00:18):

Alright, today we are talking about 529 plans. These are crucial for planning to cover for educational expenses, for kids, grandkids and more. Bruce, where do we start?

Bruce Hosler (00:29):

Well, 529 plans have been around a long time and people are familiar with them as a secondary educational account to help with college for our children, and there have been a number of changes that have taken place.

The Tax Cuts and Jobs Act expanded the qualified expenses for K through 12 to include public, private or religious schools. So, we have clients that have their kids in an expensive school, and they could use the 529 for that. In fact, Jason, you’ve had one client that for years, talk to us about the way they’ve used these plans.

Jason Hosler (01:08):

Yeah, I have one client and while they have a limitation on the deduction that they can take on their state tax return every year, this client is paying for their kids about $30,000 a semester for education expenses at a private school for these kids.

Well, they can put more than just the state deduction in there, and they can take that $10,000 per year to put towards the expenses. And even if they don’t use up all of their state deduction, they can actually add that up and use that in later tax years as well.

So, each state is going to have specific rules on how 529 contributions, deductions and the credit can be used over time. So, it’s going to be state-specific there, but it’s very useful for them.

Bruce Hosler (02:01):

So, Alex, we also, in the SECURE Act 2.0, there was a big change that allowed the rollover of unused 529 plan accounts. And I don’t want to get into big weeds on this, but just at a high-level, share with our clients what is involved with being able to roll those leftover 529 funds into a Roth IRA.

Alex Koury (02:22):

Yeah, it’s a great opportunity there to be able to not only help your child or grandchild now for their education expenses, but in the future, give them a jumpstart for their retirement accounts. And that again, specifically regarding the Roth IRA conversion.

So, what it allows for is once your grandchild or child is in general school, you know that you don’t need any more of that money for any further expenses, there’s no other kids you may want to give that money to, you can open up a Roth IRA in their name so they own that account as well.

And every year, you can make systematic Roth IRA conversions into that Roth IRA up to certain limits every year, but you can max fund that over a certain amount of time as well, up to $35,000. That’s a huge, huge benefit for their long-term retirement, future and security.

Bruce Hosler (03:12):

Yep, huge. Jon, the reason I wanted to talk about 529s today was the One, Big, Beautiful Bill Act in the impact because these 529s have been changed with that this year.

Jon Gay (03:26):

So, what has been added with the recent OBBBBB (however many Bs there are)?

Bruce Hosler (03:32):

Right. Well, Jason, talk about this expanded K through 12 expenses. It became effective back on July 5th of this year, 2025, and it expands those qualified kindergarten through 12th grade expenses, and what do they include now that they didn’t include before?

Jason Hosler (03:50):

So, previously, the first expansion allowed the funds to be used just for tuition. Now, there’s other items like books, online educational materials, standardized test fees, dual enrollment fees, even tutoring and educational therapies. So, it’s very common nowadays among our clients that they’ll have kids or grandkids who might have some type of special need, speech pathologies, tutoring and things like that.

It’s much more common I think these days, and you see that this expands the usefulness of the 529s for those early years, the K through 12 before you get to secondary education — and those educational materials, books, et cetera, that is definitely going to be helpful.

Bruce Hosler (04:39):

So, the next change that I want to make sure we talk about, Alex, is the one that’s taking effect on January 1st, 2026, and that’s the increased annual limits for these kindergarten through 12th graders. Talk to our listeners about that.

Alex Koury (04:54):

Previously, in 2025, in the past, the annual limit you could deduct or take out from the 529 plan to pay for those secondary education expenses was up to $10,000. Now, in 2026, as Bruce mentioned, those allowable withdrawals for tax-free distributions now doubles at $20,000.

So, if you are in a private school system, if you need any of these other services like we talked about for special needs, children, an example, that can go a lot further in terms of that tax free money that you need to help pay. That’s a big, big deal I think, and nothing’s getting cheaper, we all know that.

So, this helps you for those expenses and you’ve been saving in those accounts for hopefully a long time, you’ve had good earnings over the last few years. So, now, you can maximize the use some of those extra earnings if you need to for those expenses now.

Bruce Hosler (05:48):

So, Jon, I guess kind of the last thing that I wanted to point out, there was a change with the OBBBA is the post-secondary credentialing program.

So, in July of 2025, the OBBBA expanded the 529 funds that can now be used to pay for the tuition and expenses associated with post-secondary credentialing programs, including professional licenses, certificates like a registered apprenticeship and continuing education courses, even if offered outside of traditional higher education institutions.

So, the programs must be recognized under federal law or by a formal credentialing organization, but just think of trade schools and things like that, these 529s, they just expanded where everybody can use it. And for continuing ed, those of us that have professional credentials, that’s kind of cool.

I mean, I’ve always told my clients, “Hey, if your grandkids don’t use all the 529, you can use it for a golf school or something like that.”

Jon Gay (06:53):

(Laughs) We are going in different directions there, Bruce. You’re thinking golf school, what I’m thinking is we have in this country such a lack of skilled trades people and folks as tuition is going up for colleges and universities. There are so many folks that realize they could become a plumber, an electrician, something in those skilled trades and make a really nice living without having this mountain of debt. And now, you’re telling me on top of that, you can use this 529 money for those types of programs. That is absolutely huge whether you golf or not (laughs).

Bruce Hosler (07:24):

Well, and my point is yeah, you want to use it for the kids and the education, and you can change the beneficiary, but you wouldn’t do that anymore. If you had one kid that wanted to be a doctor and they’re going to go to post-secondary and they allow that now and everything like that, but the other kid was like, “Hey, I want to be a diesel mechanic.”

And by the way, diesel mechanics make pretty good money or airline mechanic on an airplane, they can use these 529s for those types of programs now. So, the kids out there, they’re looking for an educational career is much wider with these new rules of the OBBBA regarding 529 plans.

Jon Gay (08:02):

Absolutely. I think it’s a really good place to leave it for today. Gentlemen, if anybody listening or watching wants to talk to your team at Hosler Wealth Management about planning for educational future or really anything about their financial future, what are the best ways to reach you?

Bruce Hosler (08:15):

Well, certainly on the website, they can reach us at hoslerwm.com. In Prescott, Jason, where would they call you?

Jason Hosler (08:22):

Give us a call at (928) 778-7666.

Bruce Hosler (08:28):

And in Scottsdale, Alex.

Alex Koury (08:30):

(480) 994-7342.

Jon Gay (08:35):

Learn something every time I talk to the three of you guys, we’ll talk again in a couple weeks.

Bruce Hosler (08:38):

Thank you, Jon.

Jason Hosler (08:39):

Have a good one, Jon.

Alex Koury (08:40):

Bye, Jon.

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Disclosure: (23:50):

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