529 vs UTMA Comparator
Saving for your child, but not sure which account? Enter what you plan to contribute and see both accounts projected side by side to age 18 — with the tax rules, control, and financial-aid differences that the final number alone doesn’t show. Everything runs in your browser.
A one-time lump sum to open the account — baby-shower gifts and grandparent contributions often land here.
What you'd add every month from now until the child turns 18. Consistency matters more than the amount.
The projection runs until age 18. Starting at birth gives the money the full eighteen years to compound.
6–7% is a common long-run planning assumption for a stock-heavy portfolio — an estimate, not a guaranteed return.
529 plan at age 18
$81,478
Tax-free if spent on qualified education. Earnings: $37,278.
UTMA/UGMA at age 18
$78,698
After an estimated $2,362 in kiddie tax along the way. Belongs to your child outright at the age of majority.
In this projection the 529 ends about $2,780 ahead, thanks to tax-free growth. Total contributed: $44,200. How we calculate this
What this suggests — educational, not advice
For a college goal, the 529 is the stronger default: growth and qualified withdrawals are federally tax-free, many states add an income-tax deduction on contributions, and on the FAFSA it counts as a parent asset rather than the student’s.
Estimates, not guaranteed returns — and not tax or financial advice. Tax tiers are the figures current at our last review (July 2026); the IRS adjusts them annually, and state taxes are not modeled.
The differences the projection can’t show
The dollar gap at 18 is only half the decision. These four rows are where families actually get surprised — usually by the control and financial-aid lines, not the tax one.
529 plan vs UTMA/UGMA account — the structural differences, US federal rules.
Tax treatment
- 529 plan
- Earnings grow federally tax-free; withdrawals for qualified education are tax-free. Many states also deduct contributions.
- UTMA/UGMA account
- Gains are the child's unearned income, taxed each year under the kiddie-tax tiers — small accounts often pay little, large ones pay at the parents' rate.
Who controls the money
- 529 plan
- The account owner (usually a parent) keeps control indefinitely and can change the beneficiary to another family member.
- UTMA/UGMA account
- Irrevocably the child's. The custodian manages it until the age of majority (18–21 by state), then the child can spend it on anything.
Financial aid (FAFSA)
- 529 plan
- Parent asset — assessed at a maximum of about 5.64% of its value.
- UTMA/UGMA account
- Student asset — assessed at 20% of its value, over three times the parent-asset rate.
Flexibility of use
- 529 plan
- Qualified education expenses (college, apprenticeships, some K-12 tuition, capped student-loan repayment). Non-qualified use costs tax plus a 10% penalty on earnings.
- UTMA/UGMA account
- Anything that benefits the child — education, a car, a business, a deposit. No penalties, no category rules.
Ownership
- 529 plan
- The account owner; the child is only the beneficiary.
- UTMA/UGMA account
- The child, from the first dollar — it counts as their asset everywhere that matters.
How we calculate this
Both accounts get identical treatment on everything except tax, because tax is the only structural difference in how they grow. The projection runs year by year from your child’s current age until 18. Each year, both accounts receive the same contributions — your monthly amount times twelve, added at the start of the year so it earns a full year’s growth (a slight simplification versus true monthly deposits, applied equally to both sides) — and both earn the same assumed annual return. The return you set is a planning assumption, not a forecast: every figure the tool produces is an estimate, not a guarantee of investment performance, and real markets will not deliver a smooth constant percentage.
The 529 side: tax-free compounding
The 529 side compounds untaxed. Under the federal rules summarized in IRS Publication 970 (see irs.gov), earnings in a 529 grow tax-deferred and withdrawals are federally tax-free when spent on qualified education expenses — so the headline 529 number assumes the money is used as intended. Because that assumption can fail, the tool also computes a non-qualified value behind the flexible-goal note: contributions come back untouched, but the earnings portion is reduced by your marginal rate plus the 10% additional federal tax. We model federal rules only; many states sweeten the 529 further with a deduction or credit on contributions, which would widen the gap in the 529’s favor.
The UTMA side: an annual tax drag
The UTMA sidecarries an annual tax drag. Custodial accounts have no tax shelter: the account’s income belongs to your child and falls under the kiddie tax. We apply the IRS tiers to each year’s gains — the first tranche (currently $1,350) is shielded by the dependent standard deduction, the next equal tranche is taxed at the child’s 10% rate, and everything above is taxed at the parental bracket you select. The tax comes out of the account each year, which is why the two lines in the chart separate faster for larger balances: the drag compounds. These tier amounts are the figures current at our last review (July 2026); the IRS inflation-adjusts them annually.
What we simplify — and leave out
One simplification deserves honesty: we treat each year’s entire gain as income realized and taxed that year, as if the account held funds that distribute their growth annually. A buy-and-hold UTMA invested in low-turnover index funds defers much of its gain until sale and may then pay lower long-term capital-gains rates, so our model somewhat overstates the UTMA’s tax drag for patient investors — treat the UTMA line as a conservative floor rather than a prediction. We also ignore state income tax on both sides, contribution limits (both account types can absorb far more than most families contribute), investment fees, and the gift-tax paperwork that very large contributions can trigger. And we deliberately model no financial-aid effect in the dollar projection: the FAFSA difference — parent asset assessed at up to about 5.64% versus student asset at 20% (see studentaid.gov) — depends on your family’s whole financial picture, so it belongs in the comparison table above, not buried in a single number.
What the goal toggle does
The goal toggle changes no math at all. It switches which contextual note you see, because the right reading of the same two numbers depends on what the money is for: a college-bound dollar cares most about tax-free growth and aid treatment, while a flexible dollar cares most about what a non-qualified 529 withdrawal would cost. The note is educational framing, not a recommendation — plenty of families run both account types side by side, and none of this replaces advice from a tax professional who can see your full situation.
How to use the result
Start with the goal question, honestly — it does more work than any slider. If the answer is “college, almost certainly,” the 529’s tax treatment and aid treatment are hard to beat, and your next step is picking a plan (your own state’s first, for the possible deduction).
If the answer is “we want them to have money at 18, whatever they do,” look hard at the control row: an UTMA legally becomes your child’s to spend at the age of majority, which is either the whole point or a dealbreaker depending on the eighteen-year-old you imagine.
Then sanity-check the return slider at a pessimistic value — a plan that only works at 8% is not a plan. College savings also sit downstream of more basic protection: it is worth confirming your life insurance cover would keep these contributions going if something happened to you, before optimizing which account receives them.
Frequently asked questions
It depends on what the money is for. If the goal is education, the 529 usually wins: earnings grow federally tax-free, qualified withdrawals are tax-free, many states add a deduction on contributions, and the FAFSA treats it gently as a parent asset. If you want the money available for anything — a car, a business, a first apartment — an UTMA has no strings on how it is spent for the child's benefit, at the cost of annual kiddie tax on gains and the child taking full control at the age of majority. The comparator shows both projections so you can see what the tax difference is actually worth in dollars for your numbers.
You have more outs than most people assume. You can change the beneficiary to another family member, including a sibling or even yourself. Since the SECURE 2.0 changes, up to $35,000 (lifetime) can be rolled into the beneficiary's Roth IRA if the account has been open at least 15 years, subject to annual IRA limits. Qualified expenses also reach beyond four-year college: apprenticeships, some K-12 tuition, and a capped amount of student-loan repayment. The genuine worst case — a non-qualified withdrawal — means ordinary income tax plus a 10% federal penalty on the earnings portion only, never on your contributions.
Differently, and it can matter more than the tax math. On the FAFSA, a parent-owned 529 is reported as a parent asset, which is assessed at a maximum of about 5.64% when computing what your family is expected to contribute. An UTMA is the student's own asset and is assessed at 20% — more than three times the rate. On a $50,000 balance that is roughly a $10,000 assessment versus about $2,800. Families who expect to qualify for need-based aid should weigh this alongside the projections. Rules and percentages are set by Federal Student Aid and can change; check studentaid.gov for the current treatment.
A set of rules that stops parents from parking investments in a child's name to dodge tax. A dependent child's unearned income — the dividends, interest, and realized gains an UTMA throws off — is tax-free up to a small annual amount, taxed at the child's own rate up to double that amount, and taxed at the parents' marginal rate above it. The tiers are inflation-adjusted by the IRS each year. In practice small UTMA accounts often pay little or no tax, while larger balances feel a real annual drag — which is exactly the effect the comparator's projection models.
No. The comparator runs entirely in your browser and stores nothing on our servers. Your inputs are only reflected in the page's web address so you can bookmark or share your result — clear the link and they are gone.
Educational comparison only — not tax, investment, or financial advice. Projections use a constant assumed return and simplified federal tax rules; real returns vary and state rules differ. For decisions involving your taxes or financial aid, consult a qualified professional. HarborPlain explains the math; the decisions are yours.