New 529 Plan Rules Help Fund Credentials And Job Training

529 college savings plans have long been marketed as tools to help families pay for traditional four-year degrees. But starting next year, their reach has stretched well beyond the university campus. Thanks to provisions in the One Big Beautiful Bill Act (OBBBA), signed into law earlier this summer, these accounts can now be used to pay for a wide range of workforce training and credentialing costs tax-free.

This change opens the door for adult learners, teens headed to trade schools, and professionals seeking new licenses or continuing education. It also reflects a shift in how policymakers view postsecondary education: not only as a path to a degree, but also as a way to build career-ready skills.

Beginning after July 4, 2025, distributions from 529 plans can be used for vocational training, licensing exam fees, and other job-related educational expenses, as long as they meet federal requirements and your state allows it.

What The New 529 Plan Rules Cover

The law expands qualified 529 expenses to include career and technical education programs, credentialing courses, and professional development for licensed fields. Eligible costs include:

• Tuition and fees for training programs in areas such as welding, HVAC, plumbing, cosmetology, CDL certification, and electrical work
• Exam prep and registration for licensing tests like the CPA or bar exam
• Required continuing education for teachers, real estate agents, nurses, financial advisors, and others
• Books, materials, and tools required to complete a program
• Equipment necessary for certification or licensing in a skilled trade or professional field

To qualify, the program must appear in either the Workforce Innovation and Opportunity Act (WIOA) directory or the Web Enabled Approval Management System (WEAMS) maintained by the U.S. Department of Veterans Affairs. These lists are commonly used to determine eligibility for GI Bill and state workforce grants.

This means the 529 expansion is aimed at career-focused education, not casual or recreational learning. Programs that don’t issue a credential, or that aren’t state or federally approved, likely won’t qualify. That includes general career workshops, certificate programs without formal recognition, and one-off seminars not tied to licensure or a trade.

What Still Isn’t Covered

While the new rules expand the scope of 529 plans, they don’t make every type of continuing education eligible. For example, a photography workshop or an online entrepreneurship class not tied to a recognized credential would not meet the standard.

Families should also be aware that state-level tax treatment may not automatically follow federal changes. While federal law now allows 529 withdrawals for these programs without penalty, some states may continue to tax distributions used for non-college programs. That means even if a trade school or licensing program qualifies federally, it could still trigger state tax consequences.

For example, Colorado is notorious for only allowing 529 plans to be used for college and nothing else. 

This gap between federal and state treatment is not new. When Congress allowed 529 funds to be used for K–12 tuition several years ago, some states declined to follow suit. 

Who Benefits?

The rule change has wide-reaching implications. Adults who have leftover 529 balances from earlier education savings can now use those funds for licenses, job training, or career changes. Families who were unsure if a child would attend a four-year school can now support other education paths without tax penalties.

The changes may also appeal to working professionals required to complete regular continuing education. Nurses, teachers, social workers, insurance agents, and financial professionals are among those who must stay current with licensure requirements, often at their own expense. Now, they can use 529 funds to help pay for that continuing education training.

A parent might use one account to help a child enroll in a union-backed apprenticeship program, then later use remaining funds for a spouse’s real estate license. In effect, 529 plans become more versatile, covering a broader range of education expenses tied directly to workforce entry and career maintenance.

What You Should Do Now

The expanded 529 rules are already law, as the provision went into effect when the OBBBA was signed.

Those considering using funds for training or licenses should:

• Confirm their program is eligible. The safest option is to verify inclusion in the WIOA or WEAMS directories.
• Review state rules. Federal law governs the tax-free status of withdrawals for your federal tax return, but state tax rules vary. Check whether your state conforms to the new federal definition of qualified expenses.
• Time withdrawals carefully. Only expenses paid after July 4, 2025, will qualify under the new rule. Using 529 funds before that date for training or credentials may result in taxes and penalties.
• Adjust contributions if needed. If the account was originally planned for a traditional degree but now covers a shorter or less expensive program, families may want to consider changing how much they contribute or even rolling over unused funds for other family members. If you’re using the 529 plan for yourself, make sure you know if your state prevents 529 plan churning. 

For those starting new accounts or deciding how to allocate existing funds, these changes increase the value of 529 plans as general-purpose education accounts. They are no longer just for college, but for careers.