The two routes for online learning
A 529 plan is what the IRS calls a qualified tuition program. Withdrawals are tax-free when they pay qualified education expenses, and Publication 970 now groups those into three kinds: higher education expenses, elementary and secondary expenses, and postsecondary credentialing expenses. Online learning for adults can fit the first or the third.
Route one is the long-standing rule: expenses required for enrollment at an eligible postsecondary school. Publication 970 defines that as an accredited public, nonprofit or proprietary college, university, vocational school or other postsecondary institution that is eligible to take part in a US Department of Education student aid program. Whether the course is online does not matter; the school does.
Route two is new. Section 70414 of Public Law 119-21 added qualified postsecondary credentialing expenses to section 529, for distributions made after the law was enacted on July 4, 2025. Publication 970 for 2025 returns includes it.
What counts as a recognized credential program
Publication 970 says a recognized postsecondary credential program is any program to obtain a recognized postsecondary credential that meets one of four tests, and lists what counts as a recognized credential.
- Qualifying credentialing expenses: tuition and fees; books, supplies and equipment; fees for testing required to obtain or maintain the credential; and fees for continuing education required to maintain it.
- This is how a certification exam fee can become a qualified expense: the testing has to be required for a recognized credential.
| Program qualifies if | Credential qualifies if it is |
|---|---|
| It is on a state list prepared under section 122(d) of the Workforce Innovation and Opportunity Act | An industry-recognized credential issued by a program accredited by the Institute for Credentialing Excellence, the National Commission on Certifying Agencies or the American National Standards Institute |
| It is listed in the public directory of VA's Web Enabled Approval Management System (WEAMS) | An industry-recognized credential included in the Department of Defense Credentialing Opportunities On-Line (COOL) directory |
| A reputable credentialing organization requires an exam for the credential and recognizes the program as preparing people for it | A certificate of completion of a registered apprenticeship, or a state or federal occupational license, or a certification needed for that license |
| The Treasury identifies it as a reputable program | Identified by the Treasury as industry recognized, or a WIOA section 3(52) credential provided through a listed program |
Which online learning qualifies and which does not
Applying the tests above to common purchases. Where a row says "check", the answer depends on the specific school or program.
| Purchase | Likely treatment | Why |
|---|---|---|
| Online for-credit course at an accredited college that takes federal aid | Qualified | Eligible postsecondary school; required tuition and fees qualify |
| Laptop or internet service used mainly by the beneficiary while enrolled at such a school | Qualified | Publication 970 includes computer equipment, software and internet access used primarily by the beneficiary during enrollment |
| Short certificate program on a state WIOA training list | Qualified as a credentialing expense | Meets the first program test |
| Exam fee for a certification accredited by ANSI or NCCA, when the exam is required for the credential | Check | Testing fees qualify when required to obtain or maintain a recognized credential |
| Monthly or annual course-platform subscription | Usually not | Not enrollment at an eligible school and not, by itself, a listed credential program, unless the specific offering meets one of the tests |
| Hobby or personal-interest course | No | Publication 970 excludes software for sports, games or hobbies unless it is mainly educational, and general courses outside these routes have no qualifying hook |
Worked example: a mixed withdrawal
Illustrative numbers, using the method in Publication 970. A beneficiary withdraws $3,000 from a 529 in one year. Form 1099-Q shows $600 of that is earnings. They spend $2,400 on tuition for a certificate program on their state's WIOA list and $300 on the required certification exam, for $2,700 of qualified expenses. The other $300 pays for a general course subscription that does not qualify.
Tax-free earnings are $600 x $2,700 / $3,000 = $540. Taxable earnings are $600 - $540 = $60, reported as income. Publication 970 says a taxable distribution generally also carries a 10% additional tax on the amount included in income, here $6, figured on Form 5329.
The cost of the mistake is small in this example, but it scales. Paying the subscription from ordinary savings instead would have avoided both the tax and the paperwork.
Combining with tax credits, and records to keep
Publication 970 allows an American opportunity or lifetime learning credit in the same year as a tax-free 529 distribution, as long as the same expenses are not used for both. You first reduce expenses by tax-free assistance, then by the expenses used for the credit; only what is left can support a tax-free withdrawal.
Two other rules worth knowing: if a qualified expense is refunded, the beneficiary can put the refund back into a 529 within 60 days to avoid tax on it. And for tax years beginning after December 31, 2025, Public Law 119-21 raises the cap on elementary and secondary tuition from $10,000 to $20,000 a year, which shows how recently these rules changed; check the current Publication 970 before each tax year.
- Keep the receipt and a document showing what each payment was for.
- For a credential program, save proof that it is on the WIOA state list or in WEAMS, or the credentialing body's statement recognizing it, as of the date you paid.
- For an exam fee, save the credentialing body's page showing the exam is required for the credential.
- For a school course, keep enrollment confirmation and Form 1098-T if the school issues one.
- Match withdrawals to expenses paid in the same tax year.
- Ask your plan whether it has its own rules or forms for credentialing expenses.
Questions before you decide
Can I use a 529 plan for an online course?
Yes, if the course is part of enrollment at an eligible postsecondary school, meaning an accredited institution eligible to take part in federal student aid, or if it is a recognized postsecondary credential program as defined in Publication 970. Being online does not disqualify it; the school or program does.
Can 529 money pay for a certification exam?
For distributions after July 4, 2025, yes in some cases. Publication 970 lists fees for testing required to obtain or maintain a recognized postsecondary credential as qualified credentialing expenses, along with required continuing education fees.
What happens if I use a 529 for something that does not qualify?
The earnings portion of the non-qualified part is taxable income, figured with the ratio method in Publication 970, and generally carries a 10% additional tax on the amount included in income, reported on Form 5329.
Sources & verification
Product details and prices can change. Check the linked provider before buying.
- IRS Publication 970 (2025), Qualified Tuition Program chapter Accessed 30 Oct 2026
- IRS: 529 plans questions and answers Accessed 30 Oct 2026
- Public Law 119-21, sections 70413 and 70414 (GovInfo) Accessed 30 Oct 2026
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