Many families are exploring ways to prepare for future education costs, and 529 plans remain one of the most effective tools available. While these accounts were once known mainly for college savings, recent rule changes have expanded how they can be used, giving families more flexibility than ever. Understanding these options can help you make informed decisions about how a 529 plan fits into your long-term financial goals.

Today, a 529 plan can support a wide range of education paths—from private K–12 schooling to apprenticeship programs—while still offering meaningful tax advantages. With careful planning, these accounts can play an important role in a broader financial or tax strategy for individuals and families across Long Island and Suffolk County.

What Is a 529 Plan?

A 529 plan is a tax-advantaged savings account designed to help pay for qualified education costs. You contribute after-tax dollars, and while there is no federal deduction for those contributions, the real benefit comes from how the account grows over time.

Money inside a 529 plan grows tax-deferred, which means you don’t pay taxes on investment earnings each year. When the funds are used for qualified education expenses, withdrawals are generally tax-free. This combination makes 529 plans a powerful long-term savings tool for families preparing for future education needs.

Because of this tax-efficient structure, many households use 529 plans as part of their overall financial planning strategy. Whether working with a financial advisor or using guidance from a CPA firm, these accounts can help families stay organized and prepared.

The Two Types of 529 Plans

There are two main types of 529 plans, each offering different benefits depending on your goals.

529 Savings Plans: This is the most widely used option. You fund the account and select from a range of investment choices. The account’s value then grows or fluctuates based on market performance. Families often choose this plan for its flexibility and broad coverage of eligible expenses.

Prepaid Tuition Plans: Instead of investing, these plans allow you to lock in today’s tuition costs at participating schools. While this can add predictability, it may also come with limitations, such as residency requirements or restrictions on which schools qualify.

Selecting the right plan will depend on whether you want investment flexibility or prefer the predictability of prepaid tuition.

What Expenses Can a 529 Plan Cover?

One major shift in recent years is the expansion of eligible expenses. While college remains a primary use, families can now apply 529 funds to a much wider range of educational costs.

At the college or postsecondary level, qualified expenses may include:

• Tuition and mandatory fees
• Books and necessary academic supplies
• Computers and related equipment
• On- or off-campus housing

529 plans also support certain K–12 expenses. Beginning in 2026, families will be able to withdraw up to $20,000 annually per student at the federal level for qualified K–12 education costs.

Eligible expenses can include tuition, learning materials, tutoring, dual‑enrollment course fees, standardized testing, and educational therapies for students with disabilities. Some apprenticeship programs and credentialing programs may also qualify, giving these accounts even more real-world flexibility.

Because state-level rules vary, families should review their state’s tax guidelines to avoid unexpected tax impacts when taking withdrawals.

Who Can Be Named as a Beneficiary?

529 plans are often thought of as accounts for children, but they offer far more flexibility. Anyone can be a beneficiary—a child, grandchild, relative, or even the account owner.

You can also change the beneficiary if education plans shift. For example, if one child receives a scholarship or decides not to pursue further education, you may transfer the funds to another eligible family member. This adaptability helps families feel more confident that their savings will be used meaningfully.

What If the Funds Are Not Fully Used?

Families sometimes worry about overfunding a 529 plan, but several options are available if not all the money is used.

• You can keep the funds in the account for future education, such as graduate school or additional training.
• You can change the beneficiary to another family member.
• Under newer rules, some unused funds may be rolled into a Roth IRA for the beneficiary, subject to specific requirements and limits.

These options give families reassurance that their savings can continue to serve a purpose, even if education plans evolve.

Do You Have to Use Your State’s Plan?

Every state offers at least one 529 plan, but you are not obligated to use your home state's program. Many families compare plans across states to review fees, investment options, and accessibility.

However, your home state may offer tax incentives or other benefits that make its plan more appealing. For families in Suffolk County or across Long Island, understanding these state-specific benefits can make a meaningful difference over time.

Evaluating features, tax advantages, costs, and flexibility will help you select the best option for your situation.

Why 529 Plans Continue to Be a Valuable Tool

Even as education pathways shift, 529 plans remain an effective way to save for the future. Their tax benefits and broad eligibility make them useful for a wide variety of education goals.

Whether planning for traditional college, private K–12 education, or a technical or apprenticeship program, a well-managed 529 plan can help reduce future financial stress. For many families working with a CPA or financial advisor, these accounts fit naturally into broader tax and financial planning efforts.

If you're thinking about starting a 529 plan or revisiting an existing account, now is an ideal time to review your options. Thoughtful preparation today can help you make the most of these savings tools and support long-term education goals. O’Hara & Company can help you understand how a 529 plan aligns with your broader financial and tax strategy and provide guidance tailored to your needs.