Trump Account vs 529 Calculator

Both accounts get the same annual contribution growing at the same 7%. The only difference the calculator models is what the tax code does on the way out.

A 529's qualified education withdrawals are entirely tax-free, contributions and growth alike. A Trump Account only shelters your basis — the dollars you personally put in. The $1,000 government seed and every dollar of investment growth come out as ordinary income at whatever bracket applies. At the defaults of $2,000 a year for 18 years withdrawn at 22%, the 529 leaves about $67,998 spendable against the Trump Account's $63,595. The free $1,000 is real. Eighteen years of taxable growth simply costs more than it is worth.

Two cases, and you can find both with the sliders. The first is a low withdrawal bracket: the accounts cross over at around 10%. Below that, the seed's head start outruns the tax drag, and at a 0% bracket the Trump Account wins by exactly the future value of the seed, about $3,380 over 18 years.

The second is a short horizon. Run five years instead of eighteen and the Trump Account comes out ahead by roughly $764, because there has not been enough growth yet for ordinary-income treatment to hurt. The advantage does not flip to the 529 until around year 10. If you are starting when your kid is thirteen rather than newborn, the conclusion genuinely changes — which is the opposite of the advice most write-ups give.

Three things, and they do not all point the same way. State tax deductions: many states offer a deduction or credit for 529 contributions, and where they exist they are worth real money up front, widening the 529's lead beyond what you see here.

Flexibility: a 529 is only tax-free for qualified education expenses, and non-qualified withdrawals get taxed with a 10% penalty on the earnings. A Trump Account carries no such restriction. If there is a genuine chance the money gets spent on something other than school, the 529's advantage above is conditional on a future you cannot promise.

Outside contributions: employer and charitable deposits into a Trump Account are ignored here. They would add to that side of the bar, but they land in the taxable bucket alongside the seed, so they change the size of the gap without changing the shape of the argument.