(Radio Iowa) – State Treasurer Roby Smith is recommending that the legislature update Iowa tax law to match recent federal changes for the so-called five-29 (529) accounts — accounts created to save and pay for college costs as well as expenses for private K-through-12 schooling. “We have a good amount of people that are saving from obviously from birth or just a year or two old, so they can choose to use it when they want,” Smith says. “They can use it for K-12 expenses…curriculum materials, books, those types of things or they can leave it in there all the way for college if they’d like.”

The One Big Beautiful Bill President Trump signed in July doubled the amount people can withdraw annually for a student enrolled at a private or religious K-12 school. It had been 10-thousand dollars a year — but it’s 20-thousand per student, starting this year. The money may also be spent on different things, including tutoring and fees for tests like the A-C-T. “So we just want to codify that in code to make sure it’s clear that Iowans can use their 529 money for those expenses and not have to pay any additional taxes on them,” Smith says.

There’s no federal limit on how much a person can save in a five-29 account, but each state sets limits on the amount that’s tax deductible. In 2024, the Iowa legislature raised that amount to 55-hundred dollars a year that can be deposited tax-free into a five-29 account.