How To Use A 529 Plan For Continuing Education Classes

Historically, 529 plan funds were constrained to typical higher education costs: tuition, fees, books, supplies, equipment, and room and board (subject to enrollment levels). Over time, some expansions allowed K–12 tuition (now up to $20,000/year) and limited student loan repayments. But the law remained anchored in degree programs or eligible institutions.

With the passage of the One Big Beautiful Bill Act (OBBBA) on July 4, 2025, the federal rules governing 529 plans now allow a broader definition of “qualified education expenses.” 

Specifically, the expansion covers:

• Postsecondary credentialing and training expenses, not just degree or certificate programs, so long as they are listed in appropriate federal/state directories. 
• Continuing education (CE) costs required to maintain licensure or professional credentials (e.g., for accountants, real estate agents, financial advisors, nurses), including required courses or credential-maintenance fees. 
• Testing, licensing, certification fees associated with credentialing programs. 
• Books, supplies, required equipment that are integral to credential or licensure programs. 

These expansions take effect for qualified withdrawals made after July 4, 2025. 

How To Ensure Your Continuing Education (CE) Expenses Qualify

Here’s how professionals and credentialed individuals can leverage the new rules:

1. Name Yourself as Beneficiary

529 plans allow any individual (of any age) to be named as beneficiary. If you already have a 529 account (e.g. originally for a child), you can change the beneficiary to yourself (if permitted). Alternatively, open a new 529 plan account naming yourself. This flexibility lets professionals repurpose existing 529 funds for their own credentialing needs.

2. Confirm Program Eligibility

To qualify, the credentialing or training program must be recognized under federal or state registries, such as those under the Workforce Innovation and Opportunity Act (WIOA) or the Web-Enabled Approval Management System (WEAMS). 

Programs purely for general skills or professional development without a formal credential may not qualify.

3. Track Qualified Expenses vs. Non-Qualified Expenses

You can apply 529 funds toward:

• Course tuition and mandatory fees
• Licensing, certification, exam costs
• Books, supplies, required equipment

But not toward:

• Travel or transportation
• Lodging (unless in specific degree programs)
• Courses unrelated to credential maintenance
• Gym, hobby, or general personal development courses

It’s crucial to document and segregate what you’re using 529 funds for.

4. Check State Tax Conformity

While the federal rules are now broader, some states may not immediately conform to these changes. That means a withdrawal that is federal-tax-free may still be taxable (or trigger recapture) under state law. You can check your state on The College Investor’s 529 Plan Guide by State.

Risks And Drawbacks

It’s not always the most beneficial to use a 529 plan for continuing education classes. 

If you’re claiming the Lifetime Learning Credit for certain tuition/fees, you must subtract that portion from your qualified 529 expenses when calculating tax-free withdrawals. The IRS does not allow you to use the same expense for both tax benefits (no “double-dipping”).

Example: Suppose you pay $8,000 in credentialing coursework and claim $2,000 via the Lifetime Learning Credit, then you may only treat $6,000 as qualified for 529 withdrawal purposes.

Be Aware Of Timing

• The expense must be incurred before (or during) the year of the withdrawal
• Use 529 funds for what remains after credit-eligible portions
• Maintain precise records (receipts, invoices, program descriptions) in case of audit

Other Pitfalls & Considerations

• State tax recapture risk: Even if your federal withdrawal is tax-free, your state might recapture previously claimed deductions or credits if it hasn’t adopted the new rules.
• Nonconforming programs: Not all credential programs or CE courses will be eligible – the program may need to appear on approved lists.
• Complexity around mixed expenses: If a course bundle includes both credentialing material and non-qualifying content, careful apportionment is required.

What This Means For Professionals (Financial Planners, Accountants, And More)

This expansion allows professionals (accountants, financial planners, attorneys, nurses, realtors, and others) to treat their required continuing education and credential maintenance as an investment that can draw from tax-advantaged 529 funds.

For many, this reduces the net after-tax cost of Continuing Education (CE). This is a huge benefit, as many of these professional require mandatory CE training. For example, most attorneys in California must take 25 hours of Minimum Continuing Legal Education (MCLE) every three years. An accountant in California must complete a minimum of 20 hours of CE in each year of the two-year license renewal period. 

These expenses can add up, and this new 529 plan benefit can be a nice tax savings.

From a planning perspective, if you’re required to take CE classes, opening a 529 plan in your own name can be a great way to save, invest, or at least realize tax savings for your required classes.

Next Steps And Takeaways

1. Identify your credentialing costs (tuition, licensing exams, CE units) and see which portion could qualify under the expanded 529 rules.
2. Review your state’s 529 plan rules or contact the plan administrator to confirm whether the state conforms to the expanded rules.
3. Ensure your training program is listed in required registries (WIOA, WEAMS, or equivalent) to meet eligibility. We expect more programs to be listed in the coming years.
4. Keep detailed documentation separating qualified vs. non-qualified expenses.
5. Coordinate with other tax benefits (see the list of Education Tax Benefits) to avoid disallowed overlap.

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