529 Plan versus Trump Account: Which Should You Choose for Your Child?

529 Plan versus Trump Account: Which Should You Choose for Your Child?

Last updated on February 17th, 2026

Recent legislative changes present new opportunities for American parents saving for their children’s future. 2025 saw both the expansion of 529 education savings plans and the creation of “Trump accounts,” a new type of investment account for children. Both of these investment accounts offer parents the opportunity to prepare for their children’s financial future—but which should you choose? Before we answer that question, let’s break down the key features of each plan.

529 Plans

A 529 plan is a tax-advantaged savings account that can be used to pay for qualifying educational expenses. Initially created as a way for people to save for college tuition, “qualified expenses” covered under 529 plans expanded in 2018 to include tuition for K-12 education as well. With the passage of the One Big Beautiful Bill Act (OBBBA) in July of 2025, 529 plan coverage has expanded even further to include additional educational expenses.

Below are the key details to know about 529 plans:

  • Money in 529 accounts grows tax-deferred.
  • Withdrawals for qualifying educational expenses are generally tax-free.
  • There are no annual contribution limits for 529 plans (some states have lifetime contribution limits).
  • S. residents of any income level are able to open a 529 account for a designated beneficiary, including a relative, friend, or themself.
  • Funds can be used for a variety of educational expenses, including (but not limited to) college tuition, K-12 tuition, books and supplies, testing fees, technology, expenses related to participation in registered apprenticeship programs, and certain expenses related to enrollment in a recognized postsecondary credential program.
  • Many states offer tax deductions or tax credits for 529 contributions.
  • Unused funds from a 529 plan can be rolled into a Roth IRA in the name of the beneficiary or transferred to other family members.
  • 529 plans offer multiple options for investment funds.

Trump Accounts

Created by the One Big Beautiful Bill Act (OBBBA), the “Trump account” is a new tax-deferred investment account for U.S. citizens under the age of 18. Parents can start to register for the new Trump accounts when they file their 2025 tax returns, but contributions will not begin until July 2026.

Here are the key details to know about Trump accounts:

  • Savings in Trump accounts grow tax-deferred.
  • Withdrawals are taxed as ordinary income.
  • Accounts opened for children born between January 1, 2025, and December 31, 2028, include a one-time $1,000 government contribution.
  • Contributions can be made by parents, relatives, employers, and other taxable entities, as well as non-profit and government entities.
  • Contributions to these accounts are capped at $5,000 a year per child (this amount will be indexed for inflation after 2027) and can be made each year until the child turns 18.
  • Distributions before the child turns 18 are generally prohibited.
  • Penalty-free withdrawals can be made once the account holder turns 59.5 years old. A 10% additional tax applies to withdrawals taken before age 59.5, with some exceptions, such as for first-time home purchases or higher education costs.
  • Funds in 529 accounts can only be invested in one U.S. stock index fund.

So…529 Plan or Trump Account?

Trump accounts and 529 accounts are both tax-advantaged tools designed for saving for your child’s future, but they serve different purposes. While Trump accounts offer a new savings tool for children, they are significantly more limited than 529 plans. The 529 program is well-established with a wide range of investment options, while the Trump account is a new program with investment restrictions and other limitations. In short, 529 plans remain the best way to save for a child’s education and future. However, parents of children born between 2025 and 2028 should still claim the “tax-free” federal deposit provided through the Trump account program.

For additional guidance related to tax-advantaged savings and investment plans, please don’t hesitate to reach out to our team at RBT CPAs. Our Trust, Estate, and Gift team is here to help you plan financially for your family’s future. Call us today and find out how we can be Remarkably Better Together.