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So-called 529 plans are effective financial planning tools that help many families prepare for education-related costs. They allow tax-free withdrawals to pay “qualified education expenses.” Proposed legislation known as the “Education and Workforce Freedom Act,” which NAIFA supports, would significantly expand approved uses for 529 plan withdrawals and has been passed by the House Ways & Means Committee.

Recognized Certification Expenses

The proposed legislation would treat some expenses of obtaining professional credentials and licenses as “qualified higher education expenses.” These include tuition, fees, books, supplies, and equipment. The Act would also allow beneficiaries to use 529 plan withdrawals to pay testing fees to obtain or maintain recognized credentials and fees for continuing education that might be required to maintain a credential.

For elementary or secondary education beneficiaries, the Act would expand the list of “qualified higher education expenses” to include:

  • Curriculum and curricular materials
  • Books or other instructional materials
  • Online educational materials
  • Certain tutoring expenses
  • Certain testing fees

Now that the legislation has moved out of committee, the next step will be consideration by the full House of Representatives.

“Educational costs have a major impact on the finances of many American families and need to be a consideration in any comprehensive financial plan. Making 529 plans more flexible for beneficiaries and allowing their use for a wider variety of educational and professional development costs will encourage more consumers to prepare for their families’ education expenses,” said NAIFA CEO Kevin Mayeux, CAE. “NAIFA is pleased that the House Ways & Means Committee has marked up the Education and Workforce Freedom Act, and we urge its passage by the full Congress.”