As summer ends and students head back to school, parents face a dual challenge: the looming mountain of education costs and a wave of fall illnesses and sports injuries. Fortunately, back-to-school season is a great time to plan ahead with two tax-advantaged tools: 529 college savings plans for education and Health Savings Accounts (HSAs) for healthcare. Both offer significant tax benefits to help your family scale those peaks and ride out those rough waters.

529 EDUCATION PLANS – BENEFITS EXPANDED
A 529 plan is a tax-advantaged account designed for education expenses. Money invested in a 529 grows tax-free, and withdrawals + growth are federally tax-free for qualified education costs. Qualified expenses include college tuition, fees, books, room and board. In 2025, you can contribute up to $19,000 per beneficiary ($38,000 for married couples) without gift tax, or use the five-year “superfunding” rule to frontload up to $95,000 ($190,000 for couples), understanding that any additional gifts to that beneficiary during the five years will tap into your lifetime exemption.

Increasing in 2026: the One Big Beautiful Bill Act (OBBBA) will allow 529s to fund K–12 tuition, up to $20,000 per year (up from the current $10,000 annually). Additionally, the range of qualified K–12 expenses has expanded beyond just tuition to encompass curriculum materials, standardized test fees, online learning tools, tutoring costs, dual-enrollment fees, and educational therapies for students with disabilities. That’s a big win for families!

If you’re worried about over-funding a 529, several new options are available for remaining funds. The OBBBA expands tax-free 529 withdrawals to cover workforce and continuing education programs listed under the Workforce Innovation and Opportunity Act (WIOA), or by the Department of Veterans Affairs (WEAMS), and programs that prepare students for industry-recognized licensing exams – think CPA, bar, real estate licensing – and continuing education required to keep credentials active!

Even more, a 2024 update allows parents to rollover unused 529 money (up to $35,000) into that child’s Roth IRA, tax-and penalty-free. However, there are conditions: the 529 account must be open at least 15 years, funds contributed within the last five years are not yet eligible, and the child must have earned income in that year. For most 529 account holders, this means leftover college savings can help jump-start a child’s retirement fund!

Thanks to these provisions, your education savings won’t go to waste even if your child’s plans change.

HEALTH SAVINGS ACCOUNTS – TRIPLE TAX BENEFITS
Back-to-school often also means the return of sniffles, sickness, and sports injuries. For families with an HSA-eligible high-deductible health plan, a Health Savings Account (HSA) is a great way to prepare for medical expenses. In 2025, you can contribute up to $4,300 with single HDHP coverage or $8,550 for family coverage (plus $1,000 catch-up at 55+), and these contributions are pre-tax, reducing your current taxable income. HSAs offer a triple tax advantage: the money goes in tax-free, grows tax-free, and comes out tax-free for qualified medical expenses.

Your HSA can cover far more than doctor visits and prescriptions. In addition to obvious expenses, funds can be used tax-free for dental care, vision correction, physical therapy, chiropractic care, acupuncture, certain weight-loss programs, over-the-counter medications, sunscreen, and even travel or lodging for medical treatment (so long as they’re medically necessary).

You can use HSA funds now for medical bills without paying any tax, or let your balance grow for future needs – unused HSA dollars roll over each year and can be invested (don’t forget that important step!). After age 65, the 20% penalty on non-medical withdrawals disappears, so remaining HSA money can be used for any purpose (non-medical withdrawals after 65 are simply taxed like a traditional IRA). In short, an HSA is a tax-friendly health fund now and a handy nest egg in retirement.

Bottom line: Back-to-school season is an ideal time to double-check that you’re taking full advantage of these highly tax-efficient accounts. Contributing to a 529 plan and an HSA now can help secure a healthier financial future for your family.

DISCLOSURES:
The information, suggestions, and recommendations included in this material is for informational purposes only and cannot be relied upon for any financial, legal or insurance purposes. Madrona Financial Services will not be held responsible for any detrimental reliance you place on this information. It is agreed that use of this information shall be on an “as is” basis and entirely at your own risk. Additionally, Madrona Financial Services cannot and does not guarantee the performance of any investment or insurance product. Insurance products are offered through Madrona Insurance Services, LLC, a licensed insurance agency and affiliate of Madrona Financial Services. Madrona Insurance Services and individual advisors affiliated with Madrona Insurance Services and Madrona Financial Services receives commissions on the sale of insurance products. Clients are not required to purchase insurance products recommended or to otherwise implement financial advice through Madrona affiliates. When we refer to preparation and filing of tax returns, tax returns are prepared and filed by our wholly-owned sister company Bauer Evans, Inc. P.S., a licensed certified public accounting firm. Madrona Financial Services, LLC is a registered investment adviser with the SEC. Our registration with the SEC or with any state securities authority does not imply a certain level of skill or training. Madrona Financial & CPAs is a registered trade name used singly and collectively for the affiliated entities Madrona Financial Services, LLC (“Madrona”) and Bauer Evans, Inc., P.C. (“Bauer Evans”). Investment advisory services are provided through Madrona. CPA services are provided through Bauer Evans. While it's essential to optimize your tax situation, it's equally important to comply with tax laws and regulations. Always ensure that your tax-saving strategies are legal and appropriate for your financial situation.