529 money for credential programs in 2026: which licenses and certificates count
Since the summer of 2025 a 529 can pay for training that ends in a license or an industry certificate instead of a degree. The program has to pass one of four federal tests first.
Tax on this withdrawal
$500
You keep $4,650 of $5,150. Only the earnings part is taxed federally.
| Earnings part | $1,288 |
| Federal income tax at 22 % | $283 |
| 10 % additional tax | $129 |
| Minnesota tax and add-back | $88 |
Scholarship exception: the 10 % is waived up to the tax-free scholarship, income tax still applies. Minnesota: If a withdrawal is non-qualified or taxable, or is used for K-12, apprenticeship, credentialing or loan repayment, or is a Roth IRA rollover, a taxpayer who claimed the subtraction or credit owes additional Minnesota tax computed by a statutory formula (credit ratio and subtraction ratio); qualified rollovers to another 529 follow federal treatment and are not listed as recapture events.
Worked out by Radif Partners · How we calculate · federal rules from Public Law 119-21 and IRS Publication 970, state rules from each state · not tax advice
For withdrawals made on or after July 5, 2025, Public Law 119-21 lets a 529 pay qualified postsecondary credentialing expenses: tuition, fees, books, supplies and equipment required by a recognized postsecondary credential program, fees for an exam needed to obtain or keep a recognized credential, and continuing education required to keep it. A program counts when it appears on a state training provider list under the Workforce Innovation and Opportunity Act (WIOA), sits in the WEAMS directory of the Veterans Benefits Administration, prepares for an exam that a reputable credentialing body requires and recognizes the program, or is named by the Treasury. The credential itself must be an industry-recognized certification, a registered apprenticeship certificate, or a state or federal occupational license. A course that misses every test is an ordinary withdrawal: for a single filer in Minnesota at $85,000 with $5,150 of costs and 25 % growth, about $500 of tax. States decide for themselves whether to follow, and 36 of those with an income tax mention credentials in the texts we read.
A new subsection of the tax code
Before July 2025 the federal list reached trade training in two ways only: a school eligible for federal student aid, or an apprenticeship registered with the Department of Labor. Section 70414 of Public Law 119-21 added subsection (f) to section 529 and folded its expenses into the definition of qualified higher education expenses. The change applies to distributions made after the date the law was enacted, July 4, 2025. A license course paid in June 2025 from the account remains a taxable withdrawal on its earnings share; the same course paid in August is judged under the new rule.
The law names three kinds of cost. First, the tuition, fees, books, supplies and equipment required to enroll in or attend a recognized postsecondary credential program, plus any other expense that would be covered if the program were at an eligible educational institution. Second, fees for testing, when the test is required to obtain or maintain a recognized postsecondary credential. Third, fees for continuing education, when that education is required to maintain the credential. The last two are the novelty for working adults: a nurse, an electrician or an accountant renewing a license is the target as much as a teenager starting out.
| Cost | Condition in the law |
|---|---|
| Tuition, fees, books, supplies, equipment | Required for enrollment or attendance in a recognized program |
| Other costs of attendance | Only those that would count at an eligible educational institution |
| Exam fees | The exam is required to obtain or maintain a recognized credential |
| Continuing education | Required to maintain a recognized credential |
Four ways a program becomes recognized
The expense list only works if the program passes one of four tests in the statute, repeated in Publication 970. The program can be on a state list prepared under section 122(d) of WIOA. It can be listed in the public directory of the Web Enabled Approval Management System (WEAMS), kept by the Veterans Benefits Administration. It can prepare for an examination that is required to obtain or maintain the credential, when the organization behind the exam is widely recognized in the occupation and itself recognizes the program as preparation. Or the Treasury, after consulting the Secretary of Labor, can identify the program as reputable.
The first two tests are lookups: a provider is either on the state list or in the WEAMS directory, and the listing can be printed and kept. The third asks for two documents, proof that the exam is required for the credential and a statement from the credentialing organization that it recognizes the course. The fourth is empty for now in the sources we read: neither the law nor Publication 970 names a program identified by the Treasury.
Which credentials count at the end
Passing the program test is half of it; the course must lead to a recognized postsecondary credential. The law gives four families. An industry-recognized employment credential issued by a program accredited by the Institute for Credentialing Excellence, the National Commission on Certifying Agencies or the American National Standards Institute, or one listed in the Credentialing Opportunities On-Line (COOL) directory kept by the Department of Defense or a branch of the Armed Forces, or one the Treasury identifies. A certificate of completion of an apprenticeship registered and certified with the Secretary of Labor. Any occupational or professional license issued or recognized by a state or the federal government, along with any certification that is a condition for getting that license. A credential in the sense of section 3(52) of WIOA, when the program sits on a state WIOA list.
The license family is the broadest. A state license to practice a trade or a profession counts, and so does an intermediate certification the state demands before issuing it. A certificate that an employer likes but no accrediting body, directory or licensing authority stands behind does not.
When a course misses the tests
Take Dana, single, $85,000 of taxable income in Minnesota, who pays $4,800 for a nine-week course and $350 for the exam that follows it. If the course is on her state's WIOA list and the exam leads to a state license, the $5,150 is a qualified federal expense. If neither the course nor the provider passes any test, the withdrawal is non-qualified: with 25 % of the account in growth, she would owe about $283 of federal income tax, $129 of additional tax at 10 %, and $88 to Minnesota, about $500 in all. The calculator at the top uses her figures; change the amount or the growth share for your own course.
The exam fee and the course are tested separately. A fee for an exam that is required for a recognized credential can qualify even if the prep course taken before it does not, so a family that cannot document the course can still pay the exam from the account. Marcus, single in Indiana at $64,000, faces the renewal side: $1,200 of continuing education that his certifying body requires. If the certification is recognized, the account pays it tax-free; if not, the bill on 20 % of growth is about $84.
A renewal course that misses the tests
Tax on this withdrawal
$84
| Earnings part | $240 |
| Federal income tax at 22 % | $53 |
| 10 % additional tax | $24 |
| Indiana tax and add-back | $7 |
An adult who wants to use a child's leftover account for their own license can do it by becoming the beneficiary: a parent is a member of the family of the student, so the change has no federal tax effect. The leftover money page lists who counts as family.
The state side
Each state decides on its own whether a federally qualified withdrawal is also qualified on its return. Credentials are the newest item on the federal list and the one states have addressed least. Indiana's Department of Revenue says credentialing expenses are qualified withdrawals for distributions on or after July 5, 2025. Illinois says in its plan supplement that they are not qualified for Illinois tax and that the deduction comes back. Missouri taxes and recaptures them unless the expense is part of attendance at an eligible educational institution. In Minnesota, where the plan supplement says these withdrawals are subject to Minnesota income tax and recapture applies, Dana's qualified course would still cost about $88 of state tax on its earnings share at 6.80 %, before any recapture of the state benefit she received on the way in.
| State | What the state or its plan wrote on the 2025 changes |
|---|---|
| Alabama | Plan PDS (2026) reflects the federal changes: K-12 limit $20,000, expanded K-12 expenses for distributions after July 4, 2025, and Qualified Postsecondary Credentialing Expenses as qualified; no separate DOR guidance found. |
| Arizona | A.R.S. 15-1871 now sets the K-12 cap at $20,000 and conforms qualified expenses to IRC 529 as modified by 529(c)(7) and (9); the AZ529 (State Treasurer) FAQ describes H.R.1 credentialing expenses, expanded K-12 expenses and the $20,000 K-12 limit from Jan 1, 2026. |
| Arkansas | Plan supplement (Oct 2026) says postsecondary credentialing expenses and non-tuition K-12 expenses are not qualified for Arkansas tax and trigger deduction recapture, and 529-to-ABLE rollovers after Dec 31, 2025 also trigger recapture; legislation is anticipated in 2027. |
| California | FTB 2025 instructions: California does not conform to the OBBBA expansion of K-12 expenses or to qualified postsecondary credentialing expenses (IRC 529(f)), nor to the higher K-12 maximum; the earnings portion of such non-qualified distributions is taxable plus 2.5%. |
| Colorado | No official Colorado guidance on the 2025 federal changes (K-12 $20,000 limit, expanded K-12 expenses, credentialing) was found; DOR guidance (March 2025) predates H.R.1. CollegeInvest says a new law expands 529 uses to workforce training and professional certifications, details not read. |
| Connecticut | CHET Direct Fact Kit reflects the federal changes (K-12 up to $20,000 per year, expanded K-12 expenses, qualified postsecondary credentialing expenses) and says qualified withdrawals as defined by IRC 529 carry no Connecticut tax; no separate DRS guidance found. |
| District of Columbia | Plan supplement (Oct 2025): DC is reviewing the H.R.1 changes for additional K-12 expenses and postsecondary credentialing expenses; no determination of DC tax consequences has been made. |
| Georgia | Path2College Plan Description (Feb 20, 2026) and plan site reflect the $20,000 K-12 limit, expanded K-12 expenses (curriculum, books, online materials, etc.) and Postsecondary Credentialing Expenses, stated to apply for both federal and Georgia tax purposes. No separate DOR guidance found. |
| Hawaii | HI529 Supplement dated October 2025 describes H.R.1 (K-12 limit $20,000 from 2026, expanded K-12 expenses, postsecondary credentialing expenses) and states K-12 expenses remain Hawaii Non-Qualified Withdrawals; it does not single out credentialing expenses as non-qualified for Hawaii. |
| Idaho | IDeal Disclosure Statement supplement reflects H.R.1: K-12 Expenses (expanded list, $20,000 from 2026) and Qualified Postsecondary Credentialing Expenses are Qualified Expenses, and Idaho taxpayers are not subject to Idaho income tax on earnings used for Qualified Expenses. No Idaho State Tax Commission guidance could be read. |
| Illinois | Bright Start Supplement No. 2 (July 1, 2026) reflects the $20,000 K-12 limit and Postsecondary Credentialing Expenses, and states that both K-12 Expenses and Postsecondary Credentialing Expenses are not qualified for Illinois tax purposes (deduction add-back applies). |
| Indiana | DOR Information Bulletin #98 (January 2026): K-12 tuition limit $20,000 from 2026; the expanded non-tuition K-12 expenses are nonqualified withdrawals for credit recapture; postsecondary credentialing expenses (IRC 529(f)) are qualified withdrawals for distributions on or after July 5, 2025. |
| Iowa | ISave 529 Program Description supplement reflects the $20,000 K-12 limit, expanded K-12 expenses and postsecondary credentialing expenses, and says Iowa taxpayers can use assets for qualified K-12 expenses with no Iowa tax consequences if the school is an Iowa accredited school; no Iowa Department of Revenue guidance found, and the Iowa Code 2026 add-back exception still refers to tuition only. |
| Kansas | Quest529 Plan Description effective March 2, 2026 lists K-12 expenses (up to the $20,000 limit) and Postsecondary Credentialing Expenses as qualified for both federal and Kansas tax purposes. No Kansas Department of Revenue guidance was read (ksrevenue.gov unreachable). |
| Kentucky | KY Saves 529 supplement (September 2025): because Kentucky tax law is designed to align with all qualified uses under IRC 529, distributions for the expanded K-12 expenses ($20,000 limit from 2026) and postsecondary credentialing expenses are not subject to Kentucky income tax or recapture. No Kentucky DOR guidance found. |
| Maine | FAME's NextGen plan-details page reflects the $20,000 per year K-12 limit, the expanded K-12 expense list (curriculum, books, online materials, tutoring, testing, therapies) and qualified postsecondary credentialing expenses, and states Maine treats K-12 expenses as qualified. No Maine Revenue Services guidance found. |
| Maryland | The 2025-2026 Plan Description (effective 12/16/2025) lists the federal K-12 limit of $10,000 for 2025 and $20,000 for tax years after 2025, the expanded K-12 expense list and recognized postsecondary credential expenses among Qualified Education Expenses, and states Maryland treats Qualified Education Expenses as state tax-free except sibling loan payments. No separate Comptroller guidance found. |
| Massachusetts | The U.Fund Fact Kit (January 2, 2026) describes the federal $20,000 per-year K-12 cap, expanded K-12 expenses and recognized postsecondary credential expenses, but gives no Massachusetts-specific treatment; no DOR guidance found. |
| Michigan | MESP Supplement No. 5 (July 1, 2026) describes the federal $20,000 K-12 limit from 2026, expanded K-12 expenses and postsecondary credentialing expenses, but says state treatment of K-12, credentialing, apprenticeship and loan withdrawals is determined by the filing state; Michigan conformity is stated only for apprenticeship and student loan repayments (as of April 2, 2025, MCL 390.1472 and 390.1486). |
| Minnesota | Minnesota College Savings Plan Supplement No. 1 (January 1, 2026): withdrawals for K-12 Expenses and Postsecondary Credentialing Expenses are subject to Minnesota income tax and are not Qualified Withdrawals for Minnesota; recapture applies to K-12, apprenticeship, credentialing, loan repayments and Roth rollovers. |
| Missouri | MOST Supplement (Sept. 2025 / March 2026): K-12 limit $20,000 from 2026 and expanded K-12 expenses are qualified for Missouri; postsecondary credentialing withdrawals trigger Missouri tax and recapture unless the expense is part of attendance at an Eligible Educational Institution. |
| Montana | Achieve Montana supplement (October 2026): the Montana DOR has determined that both the expanded K-12 Expenses and Credentialing Expenses under H.R. 1 are qualified expenses for Montana income tax; the DOR page lists $20,000 K-12 tuition and professional credentials. |
| Nebraska | NEST Direct PDS Supplement (June 30, 2025): K-12 tuition (capped at $10,000 per beneficiary per year) becomes a Nebraska Qualified Expense from January 1, 2029; no official text read on credentialing or the $20,000 K-12 limit (see uncertain: LB 748 of 2026). |
| New Mexico | The Education Plan's Sept. 2025 supplement: New Mexico tax law is designed to fully align with all qualified uses under Section 529 (expanded K-12 expenses, $20,000 K-12 limit from 2026, credentialing). Not seen in a TRD publication. |
| New York | NY 529 site (2026 Federal Tax Updates) and the Oct. 2025 Disclosure Booklet supplement: K-12 tuition stays nonqualified for NY; DTF has not yet determined the NY treatment of the expanded K-12 expenses or credentialing expenses. The 2025 IT-201 instructions treat credentialing expenses paid to an eligible educational institution on or after July 4, 2025 as qualified, and credentialing expenses not paid to an eligible institution as nonqualified. |
| Ohio | not stated (Ohio DOT FAQ still refers to K-12 tuition up to $10,000; no guidance found on the $20,000 limit, expanded K-12 expenses or credentialing). |
| Oklahoma | Oklahoma 529 Plan Description dated Jan. 1, 2026 includes postsecondary credentialing expenses (from July 4, 2025) and primary/secondary school expenses 'up to the then applicable limit' as qualifying expenses for both federal and Oklahoma tax purposes. No OTC guidance found. |
| Oregon | not stated (OR-17 2025 lists the K-12 disconnection; no guidance found on credentialing or the 2026 K-12 limit). |
| Pennsylvania | PA 529 FAQ and IP Disclosure supplement: expanded K-12 expenses after July 4, 2025, $20,000 K-12 limit from Jan. 1, 2026 and credential program expenses are listed as qualified; the K-12 FAQ says they qualify for PA tax benefits. No PA DOR statement found. |
| Rhode Island | CollegeBound Saver supplement dated Sept. 2025: the Rhode Island Department of Taxation determined that RI tax law is designed to fully align with all qualified uses under IRC 529; distributions for the expanded K-12 expenses and credentialing expenses are not subject to RI income tax or recapture (an Aug. 26, 2025 supplement had said this was not yet determined). |
| South Carolina | Future Scholar common questions list K-12 qualified expenses up to $20K per year beginning 1/1/2026, expanded K-12 expenses and recognized postsecondary credential expenses (effective 7/4/2025). No SCDOR guidance on these changes found; SC defines a qualified withdrawal by reference to IRC 529 as amended. |
| Utah | my529 Program Description (March 25, 2026) reflects H.R. 1: K-12 limit $20,000 from 2026-01-01, K-12 expenses expanded from 2025-07-05, qualified postsecondary credentialing expenses, ABLE rollover sunset removed. No separate Tax Commission guidance found. |
| Vermont | No Vermont guidance adopting the 2025 federal changes found; Department of Taxes FAQ and VT529 FAQ (read 2026-10-19) still list K-12 expenses as subject to credit repayment. Statutory exceptions cover approved postsecondary institutions, registered apprenticeships (529(c)(8)), death/disability and student loans; postsecondary credential programs not listed. |
| Virginia | Invest529 Program Description (Oct 1, 2026) reflects H.R. 1: K-12 limit $20,000 from 2026-01-01, expanded K-12 expenses and qualified postsecondary credentialing expenses after 2025-07-04; also raised Maximum Account Balance to $675,000 from 2026-01-01. No Virginia Tax guidance found on these items. |
| West Virginia | SMART529 WV Direct supplement (on H.R. 1): expanded K-12 expenses and qualified postsecondary credentialing expenses after 2025-07-04, K-12 limit $20,000 for tax years after 2025, ABLE rollover made permanent; states that West Virginia follows the Code for these provisions. |
| Wisconsin | Edvest Plan Description Supplement No. 3 (June 1, 2026): for federal and Wisconsin purposes, K-12 expenses expanded and capped at $20,000 for 2026, postsecondary credentialing expenses added; maximum balance raised to $613,240 effective 2026-01-01. |
For Delaware, Louisiana, Mississippi, New Jersey, North Carolina, North Dakota, the texts we read say nothing specific about credential programs. Where a state is silent, its treatment is unknown rather than favorable.
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming tax no wage income, so a credential withdrawal has no state side there.
Before paying a program from the account, keep three pieces of paper with your tax records: the listing that shows the program passes one of the four tests, the description of the credential it leads to, and the receipt dated in the same year as the withdrawal. The full list of qualified expenses shows how these costs sit next to college and K-12 ones.