Using a 529 for Homeschooling

What changed

Section 70413 of Public Law 119-21, commonly known as the One Big Beautiful Bill Act (IRS Publication 970), signed July 4, 2025, is titled “Additional expenses treated as qualified higher education expenses for purposes of 529 accounts” (P.L. 119-21). Behind the bureaucratic title sits a broad expansion of what a 529 can pay for below the college level. The expanded expense list applies to distributions made after July 4, 2025, the date of enactment, which makes the new categories usable from July 5, 2025 onward (P.L. 119-21 §70413(a)(2)).

Some history explains why the fine print matters here. In the 2017 tax law, Senator Cruz’s amendment allowing limited 529 funds to be used for elementary and secondary education, including homeschool, passed 50 to 50 with the Vice President’s tiebreaking vote (Senate roll call vote 298), but Senator Sanders, working with Senator Wyden, raised Byrd Rule points of order that included the provision allowing 529 accounts for home schooling expenses (Congressional Record, December 19, 2017, Senate Daily Press), and a motion to waive the rule failed 51 to 48 (Senate roll call vote 322), so the homeschool language was stricken from the conference report. Tuition survived (26 U.S.C. §529 amendment notes); the explicit homeschool language did not. The 2025 expansion broadens what a 529 can buy below the college level without adding the word “homeschool” back, which is the root of the gray area this guide covers.

The eight expense categories

Amended Section 529(c)(7) now lists eight K-12 categories, each “in connection with enrollment or attendance at, or for students enrolled at or attending, an elementary or secondary public, private, or religious school” (26 U.S.C. §529(c)(7)). The categories, per subsections (A) through (H):

• tuition;
• curriculum and curricular materials;
• books or other instructional materials;
• online educational materials;
• tuition for tutoring or educational classes outside the home, with provider restrictions described below;
• fees for “a nationally standardized norm-referenced achievement test, an advanced placement examination, or any examinations related to college or university admission” (§529(c)(7)(F));
• dual-enrollment fees; and
• educational therapies for students with disabilities (§529(c)(7)).

Two categories carry provider rules. Tuition for tutoring or educational classes qualifies only when the instruction is outside the home, a tutoring facility counts, and the tutor or instructor is not related to the student and is licensed as a teacher in any State, has taught at an eligible educational institution, or is a subject matter expert in the relevant subject (§529(c)(7)(E)). Educational therapies qualify only for students with disabilities and only when provided by a licensed or accredited practitioner or provider (§529(c)(7)(H)). Neither the statute nor IRS Publication 970 defines what counts as a subject matter expert (§529(c)(7)(E)(iii), IRS).

A companion provision, Section 70414, also made qualified postsecondary credentialing expenses 529-qualified for distributions after July 4, 2025: tuition, fees, books, supplies, and equipment required for enrollment or attendance in a recognized postsecondary credential program, plus fees for testing required to obtain or maintain a recognized credential and fees for continuing education required to maintain one (P.L. 119-21 §70414, §529(f)). For a homeschool graduate headed to a credential program rather than a four-year campus, those expenses fall under the same account when the program meets the statutory definition of a recognized postsecondary credential program (§529(f)(2)).

The $20,000 cap and its timing

The K-12 distribution limit in Section 529(e)(3)(A) is $20,000 per beneficiary per taxable year, effective for taxable years beginning after December 31, 2025, which means tax year 2026 (26 U.S.C. §529, amount retrieved October 2026). The timing produced an odd first half-year: for all of 2025 the cap remained $10,000 (P.L. 119-21 §70413(b), 26 U.S.C. §529 amendment notes) even though the expanded expense list took effect July 5, 2025; the $20,000 cap began January 1, 2026 (P.L. 119-21 §70413(b), retrieved October 2026).

The cap aggregates across accounts. The statute counts distributions “from all qualified tuition programs” with respect to a beneficiary “in the aggregate,” so two accounts for the same child cannot double the limit (§529(e)(3)(A)). IRS Publication 970 for 2025 returns lists the eight K-12 categories and describes the K-12 limit as no more than $10,000 of tuition (IRS, page last reviewed or updated April 30, 2026).

The homeschool question

Every category above runs through the same gatekeeper: the expense must be “in connection with enrollment or attendance at, or for students enrolled at or attending, an elementary or secondary public, private, or religious school.” The word “homeschool” does not appear anywhere in Section 529 (26 U.S.C. §529). Congress wrote curriculum, tutoring, and testing into the statute; the text does not say whether it reaches a student educated at home.

Readings diverge from there. Legal Clarity describes the practical result as a gray area, writing that “the statutory gatekeeper language still points back to a school” and that families who homeschool independently, without any enrollment in a recognized school, face the most uncertainty (Legal Clarity). Tax-professional commentary reads the same text the other way. Western CPE writes that homeschooling families “now benefit directly from the expanded list of qualified expenses,” citing roughly 4 million homeschooled students (Western CPE), and in June 2025 an advocacy organization characterized the then-pending overhaul as a boost for homeschool families, listing curriculum, testing, tutoring, and therapies as newly reachable (Independent Women’s Forum), a positioning claim rather than a tax authority.

In our assessment, the strongest version of the pro-homeschool argument runs through state law. IRS Publication 970 does not mention home education, but it defines an eligible elementary or secondary school as any public, private, or religious school that provides elementary or secondary education “as determined under state law” (IRS). Some states treat home schools as private schools. North Carolina law defines a home school as a nonpublic school (G.S. 115C-563), California’s Department of Education lists establishing a home-based private school as one way to educate at home and requires anyone offering private school instruction to file a private school affidavit each year (CDE), and the Texas Supreme Court upheld a decision that children taught at home are exempt from compulsory attendance to the same extent as students enrolled in private schools (TEA). Legal Clarity writes that in states that treat homeschools as private schooling, families “may have a stronger argument” that their expenses are in connection with a private school, but “this theory has not been tested in IRS enforcement actions” (Legal Clarity). How each state classifies home education is catalogued in the state homeschool laws guide.

Congress wrote a list of expenses that reads like a homeschool budget, attached it to a school-enrollment condition, and did not address home education in the text.

The downside of guessing wrong is quantifiable. If the IRS treats a withdrawal as non-qualified, the earnings portion is included in income and generally carries a 10 percent additional federal tax (IRS Publication 970), plus any state add-ons, such as California’s extra 2.5 percent on earnings (ScholarShare FAQ).

Two categories carry conditions that apply however the school-connection question resolves: tuition for tutoring or educational classes must be for instruction outside the home from a tutor or instructor who is not related to the student, so a homeschooling parent cannot be the paid tutor, and the dual-enrollment category covers fees for dual enrollment in an institution of higher education (§529(c)(7)(E), (G)). For curriculum, books, online materials, and exam fees, neither the statute nor Publication 970 says how their school-connection condition applies to home education (§529(c)(7), IRS).

The state conformity problem

A 529 withdrawal has two tax lives, federal and state, and the second does not automatically follow the first. The table below reflects what each state’s own plan or revenue agency discloses. In the states in its first row, a K-12 withdrawal that is tax-free federally can still be taxed at the state level or trigger recapture of a state deduction or credit.

One more wrinkle: tuition conformity and expanded-expense conformity are separate questions. A state that conforms on K-12 tuition has not necessarily adopted the new categories. Indiana, for example, treats tuition at an in-state school as a qualified withdrawal but treats withdrawals for other K-12 expenses as nonqualified for recapture of its credit (IN DOR Information Bulletin 98), and New York’s tax department has not yet determined whether the expanded categories are New York qualified (NY’s 529 Direct Plan). A family planning a curriculum withdrawal should check its own plan’s disclosures for the second question.

Receipts, timing, and the 1099-Q

The mechanics are simple to state and easy to get wrong. Taxpayers compare the total of all distributions for the tax year with the adjusted qualified education expenses paid during that year, meaning qualified expenses reduced by tax-free educational assistance, and the earnings distributed beyond those expenses are included in income and generally carry a 10 percent additional federal tax (IRS Publication 970).

Each program reports a distribution on Form 1099-Q, which divides the gross distribution between earnings and basis, and the taxpayer figures the taxable portion by comparing distributions with qualified expenses (IRS Publication 970). Tax Shark writes: “Without receipts and proof of a tutor’s credentials, you cannot defend a qualified distribution if the IRS questions your Form 1099-Q” (Tax Shark). The IRS says to keep records for three years in the general case, and for six years if income that should have been reported was left off and exceeds 25 percent of the gross income shown on the return (IRS).

Families who also claim an education credit should note one coordination rule: expenses taken into account in figuring the American opportunity or lifetime learning credit must be subtracted from the qualified expenses a 529 distribution can cover (IRS Publication 970).

Deduction stacking and superfunding

In February 2018 the Institute on Taxation and Economic Policy wrote that families in many states could “make a contribution to a 529 account, receive a state income tax deduction or credit in exchange for their contribution, and then immediately withdraw those funds to pay for the private school tuition” (ITEP). The account becomes a pass-through that converts ordinary school spending into a state tax break.

Whether the play works depends partly on the conformity table above. In recapture states, among them Illinois, New York, Michigan, Minnesota, Oregon, Colorado, and Nebraska, a K-12 withdrawal can claw the deduction back, so the same move backfires. Four states structurally block or limit the in-and-out route even apart from conformity: Montana recaptures its deduction at the state’s highest income tax rate on a withdrawal from an account opened less than one year earlier (MCA 15-62-208), Wisconsin adds back an amount withdrawn within 365 days of the day it was contributed if it was previously deducted (Wis. Stat. 71.05(6)(a)26.c.), Michigan computes its deduction on contributions made in the tax year less qualified withdrawals made in the same year (MCL 206.30(1)(t)), and Minnesota subtracts same-year withdrawals from same-year contributions when it computes its credit or subtraction (Schedule M1529). The benefit at stake varies by state. Missouri allows a subtraction of up to $8,000, or $16,000 for married couples filing a combined return, for contributions to its MOST plan or any other qualified 529 plan (MO DOR 2025 instructions), and Indiana offers a 20 percent state income tax credit, up to $1,500, on contributions to its Indiana529 plan but treats withdrawals for K-12 expenses other than tuition at an in-state school as nonqualified for recapture of the credit (IN DOR Information Bulletin 98). Amounts retrieved October 2026.

On the funding side, the 2026 annual gift-tax exclusion is $19,000 per donor per recipient, unchanged from 2025 (Rev. Proc. 2025-32, amount retrieved October 2026). Section 529(c)(2)(B) lets a donor elect to treat a contribution above the annual exclusion as made ratably over five years (§529(c)(2)(B)). The IRS instructions for 2025 Form 709, which use the same $19,000 exclusion, describe the election as covering up to $95,000 of the contribution for any one beneficiary, five times the exclusion, and say the donor can make the election for as many people as the donor contributed for. When spouses elect gift splitting, the instructions say to apply the gift-splitting rules first, after which each spouse decides individually whether to make the election (IRS Form 709 instructions). The election is made on IRS Form 709, due April 15 of the year after the gift, or the next business day when April 15 falls on a weekend or legal holiday (IRS Form 709 instructions). Contributions for one person above $95,000 are reported in addition to any other gifts to that person (IRS Form 709 instructions). The basic exclusion amount for estate and gift tax is $15,000,000 for 2026 (IRS).

How this fits with other programs

A 529 plan lets a family either prepay or contribute to an account for paying a student’s qualified education expenses (IRS Publication 970), which distinguishes it from the other funding streams covered on this site. The federal tax-credit scholarship arriving in 2027 (P.L. 119-21 §70411) is a different program answering the same family-money question: donated funds routed through scholarship organizations, with its own homeschool-eligibility hinge, because its eligible expenses are those described in Section 530(b)(3), which defines a school as one determined under State law (P.L. 119-21 §70411, 26 U.S.C. §530(b)(3)), covered in the federal tax-credit scholarship guide. State education savings accounts direct state education funding into authorized accounts (NCSL), catalogued in the ESA-by-state guide. And whether a $20,000 annual cap is even a binding constraint depends on what a family actually spends; typical budgets are documented in the homeschool cost guide.

Our assessment as of October 2026: the federal expense list now fits homeschool spending better than it ever has, the cap doubled from $10,000 to $20,000 (P.L. 119-21 §70413(b)), and the two questions that decide whether a given family can use any of it are the school-connection reading, which the statute and IRS Publication 970 do not address for home education (§529, IRS), and state conformity, which differs from state to state. Families should confirm how these rules apply to their own situation with a tax professional or their state revenue agency before withdrawing.