Trump Account vs. 529 Plan
A 529 offers tax-free qualified education withdrawals. A Trump Account is a child’s IRA with special rules until the year the child turns 18; later withdrawals can be taxable. Compare the rules before comparing balances.
Trump Account: $1,000 for eligible children
The federal pilot requires an election, a valid Social Security number and U.S. citizenship for a child born in 2025 through 2028. The calculator includes it only when selected.
529 plan: tax-free education withdrawals
Contributions are after-tax. Earnings can be withdrawn free of federal income tax for qualified expenses. State benefits and plan limits vary.
Put this into a plan for your child
| Trump Account | 529 Plan | |
|---|---|---|
| Main use | Long-term saving under special IRA rules | Qualified education expenses |
| Contributions | $5,000 general annual cap during the growth period, including qualifying employer contributions. The employer tax exclusion is capped at $2,500 per employee, not per child. Certain government and qualified general contributions are separate. | Plan-specific aggregate limits; gift-tax rules apply. No federal annual income-tax contribution limit. |
| Federal deduction | No deduction for family contributions. Qualifying employer contributions can have separate tax treatment. | No deduction for personal contributions; state benefits may apply. |
| Withdrawal tax | After the growth period, IRA rules generally apply. Earnings and contributions without basis can be taxable; early-distribution exceptions do not necessarily remove income tax. | Tax-free for qualified expenses. Nonqualified earnings generally face income tax and an additional 10% tax, with exceptions. |
| Investments | Eligible broad U.S. equity index funds with statutory restrictions during the growth period. | Options depend on the plan, including age-based portfolios. |
| Access | Generally no distributions during the growth period, ending December 31 before the year the child turns 18, subject to limited exceptions. | Account owner directs withdrawals, subject to tax rules. |
A balance is not spendable after-tax cash
The pilot and qualifying employer contributions do not create family after-tax basis. A withdrawal can therefore be taxable on more than investment gains.
Check the expense and the state rules
Federal qualified-expense rules do not guarantee the same state tax treatment. Keep records and avoid claiming the same expense for incompatible tax benefits.
Compare the same saving budget
Above $5,000 annually, this model contributes more to the 529 than to the Trump Account. It does not invest the unused difference in another account.
Check financial-aid treatment separately
Aid depends on the program, account owner and applicable year. The projection does not estimate aid or recommend a trust based on a balance threshold.