529 Plan Withdrawals for Private School

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The Tax Cuts and Jobs Act of 2017 initiated a number of tax changes, including updates to 529 plans. These plans, which offer parents a tax-advantaged way to save for higher-education expenses, have been expanded to now cover grade-school costs. That's a boon for parents whose children attend private schools. 

Qualified 529 Plan Withdrawals 

Previously, qualified 529 plan withdrawals were limited to withdrawals used to pay for higher education expenses at eligible colleges and universities. Specifically, that meant schools that are eligible to participate in federal student aid programs.

Withdrawals are limited to certain expenses, including:

  • Tuition and fees
  • Room and board for students attending at least half-time
  • Books, supplies, and equipment, including computers
  • Equipment or services required for special needs students

Parents can make annual 529 plan withdrawals up to the amount required to cover any of these associated costs tax-free.


Withdrawals for any other purpose other than qualified education expenses are subject to a 10% tax penalty, and parents are also required to pay ordinary income tax on earnings. 

Using 529 Plan Withdrawals for Private Education

Under the updated tax code, parents can withdraw up to $10,000 per year to pay for tuition, books, and other eligible expenses at private elementary and high schools. That includes both religious and charter schools that enroll students from kindergarten through 12th grade. These withdrawals are tax-free as long as they're used for qualified education expenses.

The $10,000 withdrawal limit aligns neatly with the average annual cost of private education. For the 2021-2022 academic year, the average private school tuition is $11,870. Private elementary school tuition is nearly $5,000 less expensive than private high-school tuition.

Should You Use 529 Plan Money for Private School? 

At first glance, the expansion of 529 plan withdrawals seems like an obvious benefit. For parents, however, the question is whether it makes sense to use 529 plan withdrawals to cover these costs. The answer hinges on several factors, including how much you have saved in 529 plan assets, how much you're paying for private tuition, how much you anticipate your child's college expenses will be, and what you're continuing to add into the plan on their behalf. 

Suppose, for instance, that you open a 529 account for your child at birth, and you take advantage of the IRS rule for front-loading. This rule allows you to make five years' worth of contributions at once, up to the annual gift tax exclusion limit. The gift tax applies to financial gifts you make to someone else. For 2021, the annual exclusion is $15,000 per child, increasing to $16,000 in tax year 2022. Married couples filing jointly can double the maximum; $30,000 per child in 2021 or $32,000 per child in 2022. 

If you were to contribute $150,000 upfront and earn a 6% annual return, the account would grow to more than $202,000 by your child's fifth birthday. At that point, you might enroll them in private elementary school, and you'd be able to begin making new contributions to the plan. If you were to continue to maximize the annual exclusion limit, your contributions would exceed the $10,000 withdrawals for private education. And if you were to continue to earn the same 6% average annual return, your plan savings would continue to grow. 

This example assumes a best-case scenario. For parents who aren't able to front-load an account, get a later start on saving, or are contributing well below the annual gift tax exclusion limit, withdrawing $10,000 each year for private school could leave their child short when it's time to pay for college expenses. College, by comparison, usually costs much more than elementary or secondary school. According to the College Board, the average tuition rate for a public four-year university was $26,820 for 2020; that increases to $36,880 for private colleges and universities.


Money in a 529 plan that is not used for college can be transferred to another beneficiary. That can include yourself, your spouse, or another child. The funds still must be used for education, though.

Using a Coverdell ESA as a Private Education Alternative

If you're on the fence about using 529 plan withdrawals for a private school, there is another option, a Coverdell Education Savings Account (ESA). These accounts also allow parents to save for higher education in a tax-advantaged way, but they can also be used to pay for K-12 expenses. 

There are some key differences to be aware of if you're considering a Coverdell. First, you can only contribute to one of these accounts for your child until they reach age 18. There are no age restrictions with a 529 plan. 

Next, the annual contribution limit to a Coverdell ESA is capped at $2,000 for 2021 and 2022, and the maximum lifetime contribution to one of these plans is $36,000 per child. By comparison, you can contribute significantly more to a 529 plan annually, and the lifetime contribution limit for some 529 plans can be much higher, depending on which state's plan you choose. 

Third, and perhaps most importantly, you can't leave money in a Coverdell account indefinitely. If your child doesn't use all the money for elementary, secondary, or college education expenses by age 30, any remaining balance must be distributed. The IRS tacks on a 10% tax penalty and assesses ordinary income tax on the distribution. With a 529 plan, you can simply roll the account over to a new beneficiary and continue saving after your child is finished with college. 

If you do decide to tap your 529 plan for private school expenses, you can use a Roth IRA as a backup for college if you fall short. The IRS waives the typical 10% early-withdrawal penalty when they funds are used for qualified education expenses. Regular income tax would still apply.

Understanding every college savings option can help you create the best strategy for covering the full range of education expenses. 

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Internal Revenue Service. "Publication 970 (2020), Tax Benefits for Education."

  2. Private School Review. "Average Private School Tuition Cost."

  3. Internal Revenue Service. "Instructions for Form 709 (2021)."

  4. Internal Revenue Service. "Frequently Asked Questions About Gift Tax."

  5. College Board. "Trends in College Pricing 2019," Page 3.

  6. Internal Revenue Service. "Topic 310: Coverdell Education Savings Accounts."

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