Taxes and college savings · calculator
529 plan calculator
A 529 account holding $5,000 today, fed $250 a month for twelve years, would reach about $58,290 if it earned 5% a year, of which $41,000 would be your own contributions. That return is an assumption you choose, not a forecast: 529 plans invest in markets and can lose value. What the law guarantees is the tax treatment. Earnings grow without federal income tax and come out tax-free when they pay qualified education expenses. The 2025 budget law widened what counts. From tax year 2026, up to $20,000 a year can be withdrawn for elementary and secondary school tuition, twice the former $10,000, and a list of K-12 costs such as books, online materials, tutoring and test fees became qualified. Programs leading to recognized postsecondary credentials, including state licenses, industry certifications and registered apprenticeships, also qualify. Contributions of up to $19,000 per donor and beneficiary in 2026 stay within the annual gift tax exclusion.
Projected 529 balance
$58,290
$41,000 contributed, $17,290 of assumed growth
| Contributions | $41,000 |
| Assumed growth | $17,290 |
| Gift tax annual exclusion 2026, per donor and child | $19,000 |
Growth is tax-free when withdrawals pay qualified expenses (26 U.S.C. 529). K-12 tuition: up to $20,000 a year from 2026. How this is calculated.
What regular contributions to a 529 account could become, under a return you choose, and what the 2025 law added to qualified expenses.
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Monthly contributions and what they could become
The table runs the same projection as the calculator for a few monthly amounts. Two return assumptions are shown for an account opened at birth, to make the uncertainty visible, and one for a ten-year horizon.
| Monthly contribution | 18 years at 4% | 18 years at 6% | 10 years at 5% |
|---|---|---|---|
| $100 | $31,559 | $38,735 | $15,528 |
| $250 | $78,898 | $96,838 | $38,821 |
| $500 | $157,796 | $193,677 | $77,641 |
| $1,000 | $315,592 | $387,353 | $155,282 |
What the 2025 law changed
Section 70413 of Public Law 119-21 rewrote the K-12 rule. Before, only tuition at an elementary or secondary school counted, up to $10,000 a year. Now the limit is $20,000 for taxable years beginning after December 31, 2025, and qualified K-12 expenses include curriculum and curricular materials, books, online educational materials, tutoring outside the home by a licensed teacher or a subject matter expert who is not a relative, fees for standardized and admission tests and AP exams, dual enrollment fees, and educational therapies for students with disabilities. Section 70414 added recognized postsecondary credential programs (Public Law 119-21, sections 70413 and 70414).
Using the projection for a college budget
A projected balance becomes useful when set against a cost. The college savings calculator works backward from a yearly net price to the monthly saving needed, and the net price page explains how to get that number. Savings reduce the need to borrow, and federal borrowing is now capped more tightly than before: parent PLUS loans are limited to $20,000 a year and $65,000 per student from July 1, 2026, as the parent PLUS calculator shows.
Choosing a return assumption
The calculator does not suggest a rate because no honest one exists. Plans offer portfolios from cash-like options to all-stock funds, and age-based portfolios shift toward bonds as the beneficiary nears college, which usually lowers returns in the last years and reduces the risk of a loss just before tuition is due. A sensible way to use the tool is to run three cases, for example 2%, 4% and 6%, and plan on the low one. Plan fees reduce the return you actually receive; subtract them from your assumption. Contributions you make are certain; growth is not, and the gap between the two lines in the result is the part that depends on markets.
Taxes on the way out
Withdrawals are tax-free up to the qualified expenses of the year, and the expense and the withdrawal should fall in the same calendar year. A withdrawal above qualified expenses is partly taxable: the earnings share of it is added to income and generally carries an additional 10% tax under section 529 and section 530. Expenses paid with tax-free grants or used to claim an education credit cannot be counted again for a tax-free withdrawal. Rules: 26 U.S.C. 529.