Quick answer
The main account types for children are: 529 (education expenses, tax-free growth, state deductions), UTMA/UGMA (unrestricted taxable account, child owns at majority), Custodial Roth IRA (requires child's earned income, retirement growth), ABLE (tax-advantaged for disability-related expenses), and trust (attorney-drafted control). Which accounts to research first depends on your goal, control preference, and whether the child has earned income or a qualifying disability.
Child Account Comparison: 529 vs UTMA vs Custodial Roth vs ABLE
Saving for a child involves choosing among several account types with different tax treatment, control rules, and use restrictions. This tool shows the key features side by side and filters by your situation. It does not tell you which account to open. that depends on your tax situation, state, and goals. Consult a tax professional or financial advisor before making account decisions.
Filter accounts by your situation
| Account type | Primary purpose | Tax treatment | Control | Contribution limit (2026) | Key restrictions |
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This comparison covers federal rules as of 2026. State rules vary significantly, especially for 529 deductions and ABLE programs. Verify current rules with the IRS and your state's program before opening any account. This is not financial, tax, or legal advice.
Key differences to understand before choosing
529: state tax deductions, education restriction
529 plans offer tax-free growth and tax-free withdrawals for qualified education expenses (tuition, fees, room/board, books, K-12 tuition up to $10,000/year, student loan repayment up to $10,000 lifetime). Most states offer a deduction or credit for contributions to their own state's plan. Non-qualified withdrawals trigger income tax plus a 10% penalty on earnings. Accounts can be transferred to another beneficiary (family member). Starting 2024, unused 529 balances can be rolled over to a Roth IRA for the beneficiary (lifetime limit $35,000, subject to annual IRA limits).
UTMA/UGMA: flexibility, but the child owns it at majority
Custodial accounts under UTMA (Uniform Transfers to Minors Act) or UGMA (Uniform Gifts to Minors Act) hold assets for a minor until they reach the state's age of majority (18 or 21). After that, the child has full unrestricted ownership. the parent cannot take it back. There are no contribution limits, but gifts above the annual exclusion ($19,000 in 2026) may require Form 709. "Kiddie tax" rules apply: unearned income above the threshold is taxed at the parent's marginal rate until the child turns 18-19 (or 24 if a full-time student).
Custodial Roth IRA: only if the child has earned income
A child can contribute to a Roth IRA only if they have earned income. Annual contribution is the lesser of the IRA limit ($7,500 in 2026) or the child's earned income. The custodial account converts to the child's account at the state's age of majority. Long time horizon is a significant advantage. Roth contributions (not earnings) can be withdrawn any time tax- and penalty-free; earnings are restricted until age 59½ except for qualified first home purchase, disability, etc.
ABLE: for disability-related expenses only
ABLE accounts are available to individuals whose qualifying disability began before age 26. Contributions are after-tax; earnings grow tax-free; withdrawals for qualified disability expenses are tax-free. SSI resource exclusion applies up to $100,000. Annual contribution limit is the annual gift exclusion ($19,000 in 2026). Total balances above $100,000 may affect SSI eligibility. Employment income exclusion applies in some cases. Not all states have their own ABLE program; most allow out-of-state residents. See ABLE Account Guide.
Frequently asked questions
What is the difference between a 529 and UTMA account for a child?
A 529 plan restricts withdrawals to qualified education expenses; withdrawals for other purposes incur income tax plus a 10% penalty on earnings. A UTMA/UGMA account is an unrestricted taxable account that becomes the child's unqualified property at the age of majority (18 or 21 depending on state). 529 contributions receive state tax deductions in many states; UTMA contributions do not. For college aid purposes, 529 assets owned by a parent count as a parental asset (lower FAFSA impact) while custodial account assets count as a student asset (higher impact).
Can a child have a Roth IRA?
A minor can contribute to a Roth IRA only if they have earned income (wages, self-employment). The contribution is limited to the lesser of the annual IRA limit or the child's earned income for the year. A custodial Roth IRA is opened and managed by a parent or guardian until the child reaches the state's age of majority, at which point it transfers to the child's sole control.
What is an ABLE account?
An ABLE account (Achieving a Better Life Experience) is a tax-advantaged savings account available to individuals whose qualifying disability began before age 26. Contributions are after-tax, and earnings grow tax-free when withdrawn for qualified disability expenses. ABLE balances up to $100,000 are generally excluded from SSI resource limits. Annual contribution limits apply (equal to the gift exclusion). Not all states offer ABLE programs; many accept out-of-state residents.
Does a 529 account affect financial aid?
A 529 owned by a parent is reported as a parental asset on the FAFSA, assessed at up to 5.64% in the Expected Family Contribution formula. A 529 owned by a grandparent or other third party was previously assessed differently; under the simplified FAFSA (post-2022), distributions from third-party 529s are no longer reported as student income. A custodial UTMA/UGMA account is a student asset, assessed at 20% in the formula.