Trump Accounts vs. 529 Plans vs. Roth IRAs

Which Tax-Advantaged Account Is Right for Your Indiana Family?

If you have children under 18, you've probably heard about Trump Accounts — the new tax-advantaged savings accounts created by the One Big Beautiful Bill Act. Children born 2025–2028 even get a free $1,000 government deposit. With accounts officially opening July 4–5, 2026, Indiana parents are asking us the same question: how does this compare to a 529 plan or a Roth IRA?

The short answer: these three accounts do very different things, and most Indiana families should use more than one. Here's a side-by-side breakdown, with the Indiana-specific details that national guides won't tell you.

The Quick Comparison

Trump Account. A new tax-deferred investment account available to any child under 18 starting in 2026. Children born 2025–2028 also receive a $1,000 government deposit. You can add up to $5,000/year. Growth is tax-deferred. Distributions are generally prohibited before age 18. After 18, it follows traditional IRA rules. Your contributions are not tax-deductible.

Indiana CollegeChoice 529 Plan. A tax-free savings account for education expenses. Indiana gives you a 20% state tax credit on contributions — up to $1,500 back for contributing $7,500. Growth is tax-free when used for qualified education costs. No age limits, no income limits on contributions.

Roth IRA (Custodial). A tax-free retirement account your child can open once they have earned income. Growth and qualified withdrawals are completely tax-free. Contributions (not earnings) can be pulled out anytime without penalty. For 2025, the limit is $7,000; for 2026, it's projected to be $7,500.

Trump Accounts: What Indiana Parents Need to Know

Trump Accounts were created by the One Big Beautiful Bill Act. Here are the key rules.

Who qualifies. For tax years beginning after 2025, any child under 18 with a valid Social Security number can open a Trump Account. There is no income limit on the child or the parents.

The $1,000 seed deposit. Children born January 1, 2025 through December 31, 2028 who are U.S. citizens at birth are also eligible for a one-time $1,000 government deposit through a pilot program. This is actual money deposited into the account — not a tax credit or deduction. It doesn't count against the annual contribution limit. Children born outside this window can still open a Trump Account; they simply won't receive the government deposit.

Contribution limits. Up to $5,000/year per child from family members, friends, or anyone else. Employers can also contribute up to $2,500/year, and those employer contributions are tax-free to the employee. Your personal contributions are not tax-deductible. Note: contributions must be made by the end of the calendar year — there is no grace period to contribute by the return due date like there is with IRAs.

Investment rules. Until the child turns 18, all funds must be invested in low-cost index funds. The specific types of qualifying funds will be determined by Treasury regulations that are still being finalized.

Withdrawals. Distributions are generally prohibited before the calendar year in which the child turns 18. The only exceptions are rollovers to another Trump Account or to a qualified ABLE account. This is not like a traditional IRA where you can take money out early by paying a penalty — the funds are locked until 18. After 18, distributions follow traditional IRA rules, meaning withdrawals are taxable as ordinary income, with exceptions for first-time home purchases ($10,000), education, and Roth conversions.

How to get started. Accounts officially open July 4–5, 2026. The IRS is expected to release specific forms and instructions for electing a Trump Account — contact us for the latest guidance. Proposed regulations are still being finalized, so some details around contributions, qualifying investments, and distributions may change. We'll update this post as new guidance is issued.

Indiana 529 CollegeChoice: Still the Best Deal in the State

Indiana's CollegeChoice 529 plan (now branded "Indiana529") offers something almost no other state matches: a 20% tax credit on your contributions. This is a credit, not a deduction — it directly reduces your Indiana tax bill dollar for dollar.

The math. Contribute $7,500 to an Indiana529 account. Receive a $1,500 Indiana tax credit (20% × $7,500). If filing married filing separately, the maximum credit is $750. This credit is available every year you contribute. Important: the $1,500 cap is per tax return, not per beneficiary — so if you contribute $7,500 to each of two children's accounts, your total credit is still $1,500, not $3,000.

The contribution deadline advantage. Unlike Trump Accounts (which require contributions by December 31), Indiana allows you to make 529 contributions up to April 15 and have them count toward the prior tax year. This gives you an extra three and a half months of planning time — if you realize in February that you could have used the credit, you still have time to contribute and claim it on the return you're about to file.

The strategy from our newsletters. You don't need to leave the money in the 529 to get the credit. Contribute $7,500, then withdraw it for qualifying education expenses in the same year. You keep the $1,500 credit. We walk clients through this every year — it's one of the simplest tax savings available to Indiana families.

What counts as a qualified expense. Tuition and fees (college, trade school, or private K–12 tuition up to $20,000/year starting in 2026), room and board, books, computers and internet access, and up to $10,000 in student loan repayment. At the federal level, the OBBBA also expanded eligibility to include tutoring outside the student's home, standardized test fees, AP exam fees, college admissions test fees, credentialing programs, and educational therapies for students with disabilities. Note: Indiana has confirmed conformity for post-secondary credentialing expenses, but has not yet determined whether all OBBBA-expanded K–12 expenses (beyond traditional tuition) are qualified for Indiana state tax purposes. Using 529 funds for expenses that Indiana doesn't recognize could trigger Indiana credit recapture, even if they're federally qualified. Ask us before using 529 funds for non-traditional K–12 expenses.

No income limits. Anyone can contribute regardless of income. No age limits on beneficiaries either.

The 529-to-Roth IRA rollover. Under SECURE 2.0, if your child doesn't use all the 529 funds for education, up to $35,000 can be rolled over into a Roth IRA in the child's name — tax-free and penalty-free at the federal level. The catch: the 529 account must have been open for at least 15 years, and the amount rolled over cannot exceed the total contributions (and related earnings) made to the account before the five-year period ending on the date of the transfer. The rollover counts against the annual Roth IRA contribution limit ($7,500 projected for 2026).

Indiana families: know the state tax cost before you roll over. Indiana treats a 529-to-Roth IRA rollover as a nonqualified withdrawal for state tax purposes. That means Indiana will require you to repay all previously claimed Indiana tax credits on the amount rolled over. If you've been claiming the $1,500 credit for 15 years, the recapture could be substantial. This doesn't necessarily make the rollover a bad idea — but it does mean you need to weigh the Indiana recapture cost against the long-term benefit of tax-free Roth growth. Talk to us before initiating a 529-to-Roth rollover so we can calculate the net benefit for your family.

Roth IRAs: The Long-Term Wealth Builder

A Roth IRA is the most flexible of the three accounts — but it requires your child to have earned income, which makes it the hardest to fund for young children unless you employ them in your business (see our blog post on hiring your kids).

Contribution limits. The lesser of your child's earned income or the annual limit — $7,000 for 2025, projected to be $7,500 for 2026.

Tax treatment. Contributions go in after-tax (no deduction), but all growth and qualified withdrawals after age 59½ are completely tax-free. This is the only account of the three where both growth and withdrawals can be 100% tax-free.

Flexibility. Your child can withdraw their contributions (not earnings) at any time, for any reason, with no penalty and no tax. This makes a Roth IRA a dual-purpose account — it's retirement savings that can also serve as emergency money.

The compounding advantage. A single $7,000 contribution at age 14, growing at 8% annually, could reach roughly $348,000 by age 65. All tax-free.

Income limits for parents. If you're considering a Roth for yourself, note that direct contributions phase out at $150,000–$165,000 MAGI for single filers and $236,000–$246,000 for joint filers in 2025. Your child, however, will almost certainly be well below these limits.

Which Account Wins? It Depends on Your Goal

If your goal is college savings and you live in Indiana: The 529 is the clear winner. The $1,500 annual Indiana tax credit is a guaranteed 20% return on $7,500 — no other account offers anything close. Plus the growth is tax-free for education, and leftover funds can potentially roll to a Roth IRA after 15 years (though Indiana will require recapture of previously claimed credits on any rollover amount). For Indiana families, this should be the first account you fund.

If your goal is general wealth-building for a newborn (born 2025–2028): Open both a Trump Account and a 529. The Trump Account gives you a free $1,000 from the government and tax-deferred growth in index funds. The 529 gives you the Indiana tax credit plus tax-free growth for education. Together, they cover both education and non-education needs.

If your goal is tax-free retirement savings for a working teenager: The Roth IRA is unmatched. No other account offers completely tax-free growth and withdrawals. If your child works in your business or has a summer job, fund the Roth first — the earlier the contribution, the more decades of tax-free compounding you capture.

If you can only pick one account and your child was born 2025–2028: Start with the Trump Account — the $1,000 government deposit is free money. Then layer in additional accounts as your budget allows.

The Full Playbook: Birth to Age 31

An Indiana family that follows this playbook from birth could turn $181,882 in after-tax contributions into $674,799 of tax-free wealth by age 31 — a 3.7x return before the Roth even hits its peak compounding years. Here's how the three accounts work together over time.

Trump Accounts officially open July 4–5, 2026 — but you don't have to wait to get started. Open an Indiana529 today to start the 15-year Roth rollover clock, and contact us when the IRS releases the Trump Account forms so we can walk you through the election.

A Practical Example for an Indiana Family

The Millers live in Westfield. They had a baby in 2025 and also have a 16-year-old who works part-time in their small business.

For the newborn: They elect a Trump Account to claim the $1,000 government deposit. They contribute $5,000/year to the Trump Account and $7,500/year to an Indiana CollegeChoice 529 (getting $1,500 back in Indiana tax credits). Total annual cost: $11,000 after the tax credit. The child has two accounts growing simultaneously — one for education (tax-free), one for general wealth (tax-deferred).

For the teenager: They pay the 16-year-old $12,000 for legitimate work in the family business. Because the teen is a dependent, their standard deduction equals $450 plus their earned income — or $12,450 — which exceeds their $12,000 in wages, so federal income tax is $0. The parents deduct $12,000 at their 24% rate, saving $2,880. The teen contributes $7,500 (the projected 2026 limit) to a Roth IRA. They also contribute $7,500 to their own Indiana CollegeChoice 529, generating a $1,500 Indiana tax credit on the teen's return.

Combined family tax savings in one year: $2,880 (federal deduction for teen's wages) + $1,500 (parents' 529 credit for newborn) + $1,500 (teen's own 529 credit) + $1,000 (free Trump Account deposit) = roughly $6,880 in tax savings and free money — while building three long-term accounts.

What About UGMA/UTMA Accounts?

We get this question occasionally. Uniform Gift to Minors Act (UGMA) and Uniform Transfers to Minors Act (UTMA) custodial accounts are simpler — you deposit money, invest it however you want, and the child gets it at age 18 or 21 depending on the state. But there's no tax credit, no tax-free growth, no government match, and investment income above $2,700 gets taxed at the parent's rate (the kiddie tax). For most Indiana families, the three accounts above offer better tax treatment across the board. UGMA/UTMA accounts still have a role for families who've maxed out the other options or need complete flexibility in how funds are used.

Frequently Asked Questions

Can I have all three accounts for the same child? Yes. There is no rule preventing a child from having a Trump Account, a 529 plan, and a Roth IRA simultaneously. In fact, that's the optimal setup for most Indiana families with newborns.

Does the $1,000 Trump Account deposit count as income? Not when deposited. It will be taxed as ordinary income when eventually withdrawn — similar to a traditional IRA.

Can grandparents contribute to a Trump Account? Yes. Anyone can contribute, subject to the $5,000 annual limit per child.

What if my child doesn't go to college — is the 529 money stuck? No. You can change the beneficiary to another family member, use it for trade school or vocational training, use up to $10,000 for student loan repayment, or roll up to $35,000 into a Roth IRA (after the 15-year holding period). The OBBBA also expanded qualifying expenses to include tutoring, credentialing programs, and educational therapies. One caution for Indiana families: a 529-to-Roth rollover triggers Indiana credit recapture on the amount rolled over — talk to us before initiating one.

My child doesn't have earned income — can they still get a Roth IRA? No. Roth IRA contributions require earned income. This is why hiring your child in your business is such a powerful companion strategy — it creates the earned income that unlocks Roth contributions. See our blog post on hiring your kids for details.

When should I open the 529? As early as possible. The 15-year holding period for 529-to-Roth rollovers starts the day you open the account. Opening a 529 at birth means your child could begin rolling leftover funds to a Roth IRA at age 15. The IRS has not yet confirmed whether the beneficiary needs earned income to complete a 529-to-Roth rollover — the prevailing interpretation among practitioners is that earned income is not required, but we recommend checking with us for the latest guidance before initiating a rollover.

Three Strategies Most Indiana Families Miss

Strategy 1: Get $1,500 back from Indiana every year your child is in school.

If you have a child in college or private K–12, contribute $7,500 to their Indiana529 account, then turn around and withdraw the same $7,500 to pay for their tuition or other qualified education expenses. You don't need to leave the money in the 529 to get the credit. Indiana will give you a $1,500 tax credit — that's a guaranteed 20% return on money you were going to spend on education anyway. Do this every year you have a child in school. And remember, you now have until April 15 to make contributions that count toward the prior tax year — so if you missed it by December 31, you still have time. Ask us how this applies to your particular situation.

Strategy 2: Open a 529 at birth — even with $25 — to start the Roth rollover clock. If you just had a baby, open an Indiana529 account now with any amount to start the 15-year holding period for future Roth IRA rollovers. Here's why this matters: when your child turns 15, you can begin rolling up to $7,500/year of unused 529 funds into a Roth IRA in their name — tax-free and penalty-free at the federal level — up to $35,000 over their lifetime. If you wait until your child is 5 to open the 529, the Roth rollover option won't be available until age 20. Starting at birth gives your child a 5-year head start on tax-free retirement savings. Keep in mind that Indiana will require recapture of previously claimed state tax credits on any amount rolled to a Roth, so the net benefit depends on your family's specific numbers. (Note: the IRS has confirmed that 529-to-Roth rollovers are not subject to the usual Roth income-limit phaseouts, but has not yet issued definitive guidance on whether the beneficiary needs earned income to complete the rollover. The prevailing interpretation is that earned income is not required, but we're monitoring this closely.) Ask us how to set this up.

Strategy 3: Hire your teenager, fund their Roth, and use the 529 credit to wipe out their Indiana tax.

If you own a small business and have a teenager, consider this combination: pay your child $15,000 for real work in your business. Because your child is a dependent, their standard deduction equals $450 plus earned income — or $15,450 — which exceeds the $15,000 in wages, so federal income tax is $0. Your child then contributes $7,500 to a Roth IRA for tax-free growth. To handle the Indiana state tax on the $15,000 of wages, your child contributes $7,500 to their own Indiana CollegeChoice 529 and receives a $1,500 Indiana tax credit — which wipes out most or all of the Indiana tax owed on those wages. The net result: your business gets a $15,000 deduction at your tax rate, your child has $7,500 growing tax-free in a Roth IRA, Indiana gave your child $1,500 back, and the family's total tax on that $15,000 is close to zero. Ask us how this applies to your particular situation.

What You Should Do Now

1. If you had a baby in 2025 or expect one by 2028, contact us about claiming the $1,000 Trump Account government deposit. The IRS is expected to release specific forms and instructions — we'll guide you through the process.

2. If you have a child under 18, a Trump Account may be worth opening even without the government deposit. Call us to discuss whether it fits your family's plan.

3. Open an Indiana CollegeChoice 529 as early as possible. Even a small initial deposit starts the 15-year clock for future Roth IRA rollovers. Contribute $7,500 to get the full $1,500 Indiana tax credit.

4. If your child has earned income (from your business or a part-time job), open a custodial Roth IRA and fund it. The earlier the better.

5. Don't wait for Trump Account regulations to be finalized before opening your 529. The 529 is available now, the tax credit is immediate, and the two accounts complement each other.

These accounts work best when they work together — and the right combination depends on your family's income, goals, and timeline. If you'd like help figuring out which accounts make sense for your situation, call us at 317.867.5427.

IRS Circular 230 Disclosure: Pursuant to requirements imposed by the Internal Revenue Service, any tax advice contained in this communication is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing, or recommending to another person any tax-related matter. Please contact us if you wish to have formal written advice on these matters.