# How grandparents can fund education with 529 plans > 529 savings accounts offer tax-free withdrawals for school costs, but rules vary by state and education type. - Title: How grandparents can fund education with 529 plans · Kiplinger - Summary: 529 savings accounts offer tax-free withdrawals for school costs, but rules vary by state and education type. 529 plans let grandparents contribute… - Keywords: 529 plans, education savings, grandparents, college funding, k-12 tuition, tax-free distributions, roth ira rollover, education expenses, state tax deductions, apprenticeship programs, fund, education - Source: Kiplinger — https://kiplinger.com/retirement/retirement-planning/grandparents-guide-to-529-plans-for-college-and-private-school - Published: 2026-09-23T12:30:00+00:00 - Read time: 2 min - Topics: 529 plans, education savings, grandparents, college funding, k-12 tuition, tax-free distributions, roth ira rollover, education expenses, state tax deductions, apprenticeship programs ## What 529 plans do for grandparents 529 accounts let grandparents contribute tax-deductible gifts that grow tax-free. Distributions for college, credentialing programs, and apprenticeships are completely tax-free. > Contributions to 529 accounts are treated as gifts to the beneficiary, and many states give residents who fund accounts in that state a deduction or credit on state tax returns. ## K-12 tuition and school costs You can withdraw up to twenty thousand dollars per year tax-free for elementary and secondary school tuition, plus books, tutoring, AP test fees, and educational therapy for students with disabilities. > Tax-free distributions of up to $20,000 per year per beneficiary can be taken from 529 accounts to pay tuition for elementary and secondary school. ## State tax rules vary Not all states treat K-12 withdrawals as tax-free for state income tax purposes. Check your state's specific tax laws before withdrawing for private school. > Not all states treat payouts for K-12 schooling as tax-free for state tax purposes, so be sure to check your state's tax laws. ## What happens to leftover money If your grandchild doesn't use all the funds, you can withdraw the money but will owe income tax plus a ten percent penalty on the earnings portion. > You can always withdraw it and use the money for purposes other than education, but you will owe regular income tax and a 10% additional penalty tax on the withdrawn earnings. ## Roll funds into a Roth IRA Under the SECURE 2.0 Act, you can transfer up to thirty-five thousand dollars lifetime from a five twenty-nine to the beneficiary's Roth IRA if the account has been open at least fifteen years. Annual transfers can't exceed the Roth contribution limit. > Some 529 funds can be transferred tax-free to a Roth IRA for the 529 beneficiary in a direct trustee-to-trustee transfer. ## Roth IRA rollover rules The five twenty-nine account must be open fifteen years with the same beneficiary. Contributions from the prior five years can't be transferred. The annual transfer can't exceed the Roth limit minus any direct IRA contributions the beneficiary made that year. > The 529 account must have been open for at least 15 years, with the same beneficiary. There is a $35,000 lifetime cap on such transfers. ## Other options for leftover funds Keep money in the five twenty-nine for graduate school or credentialing programs. Roll over to a sibling's five twenty-nine account, transfer to an ABLE account for a disabled beneficiary, or use up to ten thousand dollars to pay student loan debt. > Leftover funds can be rolled over from a beneficiary's account to an ABLE account for a disabled beneficiary or the beneficiary's disabled siblings. ## Homeschooling doesn't qualify Five twenty-nine tax-free distributions cannot cover homeschooling expenses, even though they cover K-12 private school tuition and materials. > Tax-free 529 payouts cannot be made to cover homeschooling expenses. ## Key takeaway 529 plans let grandparents contribute tax-deductible gifts that grow tax-free for K-12 and college, with flexible options for leftover funds.