You can now use your 529 plan to pay for SAT prep

Most families with a 529 plan think of it as a college savings account. That's understandable. Until recently, that's mostly what it was. But a federal law signed in July 2025 significantly expanded what counts as a qualified expense, and SAT prep is now on the list. For families already saving in a 529, this means test prep just got meaningfully cheaper.

If you're not familiar with 529 plans, or you have one but haven't thought about it since you opened it, this is worth understanding.

What is a 529 plan?

A 529 plan is a tax-advantaged savings account designed for education expenses. You contribute after-tax money, it grows tax-free, and when you withdraw it for qualified expenses, you pay no federal tax on the gains. Many states also offer a tax deduction or credit on contributions, which makes the benefit even larger depending on where you live.

Every state offers at least one 529 plan, and over 30 states provide some kind of tax benefit for contributions. Most states require you to use their plan to get the state tax deduction, but you can use 529 funds at eligible schools nationwide regardless of which state's plan you're enrolled in.

Historically, qualified expenses meant college tuition, room, board, fees, and textbooks. Since 2018, families have also been able to use up to $10,000 per year for K-12 private school tuition. What changed in 2025 goes further.

What changed

The One Big Beautiful Bill Act, signed into law on July 4, 2025, expanded the definition of qualified K-12 education expenses under 529 plans. Today, families can use 529 funds tax-free for:

Tutoring services, standardized test fees and test prep (SAT, ACT, AP), curriculum materials and textbooks, online learning platforms, educational therapy, and dual-enrollment course fees.

As of the 2026 tax year, the annual withdrawal cap for K-12 expenses has also doubled from $10,000 to $20,000 per student. That's a significant increase for families paying for a combination of tuition, tutoring, and test prep.

The practical result: if you spend $2,000 on SAT prep, you can reimburse yourself from your child's 529 account without paying any federal tax on that withdrawal. Depending on your tax bracket and state, that could save you $500 to $800 or more on a single prep course.

Why this matters for SAT prep specifically

We've written before about the return on investment of SAT prep. A higher score can unlock merit scholarships worth tens of thousands of dollars and expand the range of colleges where a student is a competitive applicant. That includes the most selective schools, many of which meet 100% of demonstrated financial need for admitted students. Getting into one of those schools can make college dramatically more affordable than a less selective alternative.

The 529 change doesn't change the ROI of test prep itself. It just reduces the cost of getting there. Families who are already saving in a 529 can now use those funds for something that directly improves their child's college outcomes and financial aid position, instead of paying for it entirely out of pocket.

For families weighing whether to invest in test prep, this removes one of the friction points. The money is already set aside for education. Test prep is now a qualified use of it.

How to actually use your 529 for test prep

The process is straightforward. Pay for the test prep service as you normally would. Then request a withdrawal from your 529 plan for the same amount. Because the expense is now qualified, the withdrawal is federal tax-free. Keep receipts for your records.

If you don't have a 529 plan yet

Opening a 529 is simple. Every state has its own plan, and you can usually open one online in under 15 minutes. Start by checking your home state's plan, since that's typically where you'll get the state tax deduction. SavingForCollege.com has a comparison tool that covers every state plan, fees, and tax benefits.

You can contribute any amount, there's no minimum to get started, and the money can be used whenever your child needs it. Even if you open one now and your child is a junior, the tax-free withdrawal benefit applies immediately for qualifying expenses like test prep.

Sharp is built for every student, no matter their starting point — personalized prep at a price that makes sense. getsharp.app