Federal law expands 529 expenses to cover homeschool costs, raises withdrawal limit

The One Big Beautiful Bill Act that President Donald Trump signed into law in July 2025 ushered in tax savings for families who homeschool.

During the 2024 campaign, Trump said he would expand the use of 529 education savings accounts to homeschoolers, allowing "$10,000 a year per child, completely tax free to spend on costs associated with homeschool education."

Named after section 529 of the Internal Revenue Code, 529 plans investment accounts enable families to save for K-12, undergraduate or graduate-level education. Families can put in and withdraw money for federally regulated "qualified education expenses." Earnings are not subject to federal tax, and are generally not subject to state taxes either.The new broadened the definition of qualified education expenses for 529 plans, with federal law now recognizing a range of homeschooling costs, including curriculum and instructional materials, online education programs, tutoring and educational therapies for students with disabilities. 

The legislation also increased 529 plan tax-free withdrawal limits to cover educational expenses from $10,000 per child per year, to $20,000 per child per year.

Federal law does not explicitly define homeschooling; most regulation falls under state and school district jurisdiction. State education departments can oversee guidelines and requirements for homeschooling families, but the level of homeschooling regulation varies from state to state.

Another provision established a federally funded tax credit scholarship program for elementary and secondary education expenses beginning in 2027 that would also apply to homeschooling costs. 

Under the program, any taxpayer who donates up to $1,700 annually to a scholarship granting organization — a 501(c)(3) charity — will be eligible to receive a dollar-for-dollar tax credit for their contribution. These organizations, in turn, will be required to use the contributions to grant student scholarships that help families, including those who homeschool, pay for educational expenses.

To be eligible for the scholarship, families' household incomes must not exceed 300% of their area's median gross income. States also have to opt-in first, which 27 have done as of late January.

Trump promised to expand the use of 529 education savings accounts to homeschoolers, allowing $10,000 a year per child, tax-free. His administration's tax and spending law increases the annual tax-free 529 withdrawal cap from $10,000 to $20,000 per child and expands qualified expenses to cover various homeschool costs.

We rate this Promise Kept.