What’s the Difference Between a Trump Account and a 529 Account?
Both encourage long-term saving for a child’s future, but each has a different tax structure. Here’s what you need to know.
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For decades, the 529 plan has been the go-to savings vehicle for parents building a college fund for their children. Now, there’s a new kid on the block: Trump Accounts, also known as 530A accounts, a new type of tax-advantaged investment account designed for eligible children under the age of 18.
At first glance, the two sound pretty similar: They’re both government-backed ways to invest for a child’s future; they offer tax advantages; and they’re meant to encourage long-term saving.
But for families trying to plan ahead, the differences between a 529 plan and a 530A account can have major implications for flexibility, taxes, and overall financial strategy. Here’s how each one works, and how families can use them in tandem rather than choosing one over the other.
What is a 529 plan?
The 529 plan has been around for years, and it’s popular for good reason. “For many families, this is a powerful, flexible way to save for a child’s future,” says Jamie Bosse, CFP, CCFC, RFC, at CGN Advisors.
The core purpose is simple: to help families save for education costs. Anyone can open one—parents, grandparents, or even a child’s aunt or uncle—and the beneficiary can be any age.
The biggest benefit is the tax treatment. When parents contribute, Bosse says, they may qualify for a state tax deduction depending on where they live. (There is no federal deduction.) Once the money is in the account, it grows tax-free with preset investment options that typically minimize risk as the child gets closer to college age. And families owe no taxes on the investment gains as long as withdrawals are used for qualified education expenses such as:
College tuition
Room and board
School supplies
Trade and vocational programs
Study abroad programs
Community college
K to 12 private school tuition (with limits)
What happens if the child doesn’t go to college or gets a full ride? The account is still surprisingly flexible. “It's still your money, and you can redirect it elsewhere if the child doesn't use it,” Bosse explains.
The balance can be transferred to another family member, converted to a Roth IRA for the child (although there are also limits and rules for the conversion), or kept for future grandchildren, all while keeping the tax-free growth intact. You can also cash it out and pay the tax and penalty—it’s important to note that you only pay it on any investment gains, according to Bosse, not your original contributions.
What is a 530A account?
Trump Accounts are much newer than 529 plans, introduced as part of the 2025 One Big Beautiful Bill Act to help children build long-term financial security. They also come with more nuance, says Bosse.
A 530A account can be opened for any eligible child under the age of 18. Those born between January 1, 2025, and December 31, 2028, will get $1,000 in seed money from the U.S. government if parents apply, but they must be U.S. citizens and have a Social Security number to qualify. Families can contribute up to $5,000 per year, and some employers may offer matching contributions up to $2,500 per employee. (A slew of tech and finance companies have recently promised such matches.)
Unlike a 529, 530A accounts grow tax-deferred not tax-free. That means families won’t pay taxes on investment growth each year, but they’ll be taxed when they withdraw the funds—similar to a traditional IRA.
Bosse points out that 530As also have several limitations that don’t apply to 529s: investments are restricted to U.S.-based index funds (investing in the stock market always comes with various levels of risk), and those funds are locked up until the child turns 18, which is when the account can pretty much be considered a traditional IRA.
Families have more flexibility in how they can use the money in a 530A than the education-focused 529 accounts. The account can be held until the child reaches retirement age, and Bosse says certain uses—like education expenses and a first-time home purchase—may avoid the 10% penalty that comes with withdrawing from a traditional IRA before age 59 ½ unless there’s an exception.
What is the key difference between the two?
The clearest dividing line between these accounts is how withdrawals are treated:
529 plans: tax-free growth and tax-free withdrawals for qualified education expenses
530A accounts: tax-deferred growth but withdrawals are taxed as ordinary income
In a nutshell, Trump Accounts can provide a government boost upfront, but families may face a tax bill later when the money comes out. That distinction can meaningfully reduce what’s actually available to spend, making 529s generally more tax-efficient for education savings
Consider Bosse’s example: If a family withdraws $2,000 from a 530A, and their tax rate is 17%, they’d owe $340 in federal taxes—leaving only $1,660 to use. State taxes could further reduce the amount. With a 529 plan, a $2,000 withdrawal for qualified education expenses isn’t taxed, which allows the family to spend the full $2,000.
Is it better to open a 529 or 530A Account?
“Taking the ‘free’ $1,000 is a great idea, but for long-term tax efficiency and flexibility, 529 plans are often the stronger planning tool,” Bosse says. “As always, the right answer depends on your goals, your state, and your bigger financial picture.”
But families don’t have to choose; both accounts can be used as a complement to one another. Bosse suggests taking the $1,000 and any employer match contributions for a 530A, but not adding more to the account.
“Make sure it is invested in a growth-focused index fund and let it ride,” she advises, adding that she’d direct any ongoing savings to 529s. “This is where I’d put the bulk of the savings to reap more tax rewards now (depending on the state you live in) and later (tax-free growth).”
But she warns against investing too conservatively or leaving the funds in cash holdings for a 529: “You want those funds invested and growing.”
