With the enactment of the One Big Beautiful Bill Act in July 2025, Congress introduced a new class of tax-advantaged savings vehicles for minors known as Trump accounts. Here’s a breakdown of the key features.
What are they?
Trump accounts are custodial savings and investment accounts that can be established for U.S. children under age 18 to encourage long-term financial security. Contributions are made on an after-tax basis, and investments grow tax deferred until withdrawn. Withdrawals are generally prohibited until the year the child reaches age 18. These accounts are specifically targeted toward children.
Who is eligible?
Beginning July 2026, Trump accounts can be established for children who are U.S. citizens, have a valid Social Security number, and are under age 18. In addition, the new law creates a pilot program in which qualified account holders born between January 1, 2025, and December 31, 2028, are eligible for a one-time government contribution of $1,000. The Department of the Treasury may automatically enroll these children into the program. Children born outside of the 2025–2028 window, but who are still under age 18, qualify for a Trump account, though they will not receive the $1,000 seed grant. Trump accounts do not have income limits or restrictions.
What are the contribution limits?
Parents, relatives, and others may contribute up to $5,000 per child annually. The $5,000 cap will be adjusted for inflation in future years. Contributions are made with after-tax dollars.
Employers are able to set up plans under which contributions may be made to employees’ Trump accounts or the Trump accounts of employees’ dependents. Up to $2,500 may be contributed annually for each employee. Contributions made by an employer to a Trump account on behalf of an employee under such a plan are not included in the employee’s gross income.
Charities and governmental entities may also make contributions to Trump accounts under certain conditions. Any such contributions by charities and governmental entities do not count toward the $5,000 annual limit. Also, the $1,000 federal seed contribution is excluded from the $5,000 annual contribution limit.
What is the tax treatment for these accounts?
Contributions from individuals are made with after-tax dollars, meaning they are not deductible but will eventually be able to be withdrawn tax-free. Employer, charitable, and government contributions, as well as the $1,000 seed grant, are not considered income at the time the contribution is made but will be included in income upon distribution.
Earnings on all contributions grow tax deferred. When the account holder reaches age 18 and is able to take distributions, the account may contain amounts that are not taxable upon distribution (amounts contributed by parents and relatives) as well as amounts that are taxable upon distribution (earnings, and any contributions made by an employer, charitable or governmental entity, or as a result of the $1,000 seed grant). The same general rules that apply to IRAs apply to Trump accounts, including:
- If there are non-taxable parent or individual contributions in the account, any distribution is considered to consist of a proportionate share of taxable and non-taxable amounts.
- Taxable distributions are taxed at ordinary income rates, and a 10% additional penalty tax applies if a distribution is made prior to age 59½ unless an exception applies.
- Exceptions to the 10% penalty include withdrawals for higher education costs and up to $10,000 for a first-time home purchase.
How are the funds invested?
Trump account funds are automatically invested in a mutual fund or exchange-traded fund that tracks the returns of a qualified index, such as one tracking the S&P 500. Account holders cannot choose between multiple funds or adjust the investment mix, and the allocation is fixed and limited to U.S. equities. Funds must have annual fees no higher than 0.1%.
IRS Issues Guidance on 530A (Trump) Accounts
In December 2025, the U.S. Treasury Department and the IRS released guidance (Notice 2025-68) on 530A accounts (also known as “Trump Accounts”), a type of tax-advantaged savings account for children created by the One Big Beautiful Bill Act. This guidance provides more details on how the accounts will work.
Growth period
A 530A account is a traditional individual retirement account (IRA) established for the exclusive benefit of an eligible individual (a child who is a U.S. citizen, has a valid Social Security number, and is under 18) and designated as a “Trump Account” when created. Money may be contributed to a 530A account during the “growth period” and withdrawn after this period ends to use for education, a home purchase, or other purposes. This growth period begins when an account is opened and ends on December 31 of the year before the account beneficiary turns 18. For example, if a child is born in 2025 and turns 18 in 2043, the growth period for the child ends December 31, 2042. During this period, 530A accounts differ from traditional IRAs in several ways, including: (1) there’s no earned income requirement to contribute; (2) specific contribution limits and requirements apply; (3) investment options are significantly limited; and (4) distributions are prohibited except in limited cases.
Establishing a 530A account
Parents, guardians, or other authorized representatives may create a 530A account for a child by making an election using IRS Form 4547 or through an online portal (trumpaccounts.gov) expected to launch in mid-2026. Once the election is processed, the Treasury Department or its agent will send instructions to complete an authentication process and activate the account.
Pilot program contribution
A key feature of these accounts is a pilot program contribution by the federal government. For children who are U.S. citizens born between January 1, 2025, and December 31, 2028, with a valid Social Security number, and no prior pilot election, the Treasury Department will deposit a one-time $1,000 contribution for each eligible child. Pilot contributions will not begin before July 4, 2026, and only after the Treasury Department confirms the account has been opened. The $1,000 seed grant is not subject to reduction or offset and is excluded from income.
Other contributions
In addition to the federal seed money, 530A accounts allow for other types of contributions during the growth period, including qualified general contributions from government entities or charitable organizations, employer contributions, qualified rollover contributions from another 530A account, and contributions from parents or relatives. Unlike traditional IRAs, the child does not need earned income to receive contributions. Contributions to these accounts cannot come from SEP IRAs or SIMPLE IRAs.
Account contributions are capped at $5,000 per year and will be indexed for inflation beginning after 2027. An employer may contribute to the 530A account of an employee or the employee’s dependent up to $2,500 per year, which counts against the $5,000 limit. Government-funded contributions and pilot program payments are excluded from this annual cap. Contributions must be made within the calendar year to count for that tax year, and no contributions may be made before July 4, 2026.
Account investments
During the growth period, 530A account funds may only be invested in eligible investments, which are domestic mutual funds or exchange-traded funds (ETFs) that track a qualified index (such as the S&P 500), do not use leverage, have annual fees not exceeding 0.1% of the fund’s balance, and meet other criteria determined by the Treasury Secretary. Money market funds and cash holdings are not eligible investments, except temporarily while reinvesting contributions or proceeds from sales.
Distributions
Distributions are not permitted until the child turns 18; however, distributions during the growth period may be made for qualified rollovers, qualified ABLE account rollovers (only during the calendar year the child turns 17 and not earlier), refunds of excess contributions, or upon the beneficiary’s death. Hardship withdrawals are not allowed.
In the post-growth period, distributions generally follow traditional IRA rules, including a potential 10% early withdrawal penalty if a distribution is made before age 59½ and no exception applies. (Exceptions include a first-time home purchase and qualified education expenses.) However, these accounts remain separately tracked for basis and reporting purposes and cannot be aggregated with other IRAs for certain calculations.
During the growth phase, 530A accounts are subject to special reporting rules, including additional disclosures not required by IRAs (such as reporting the source and type of contributions, basis information, and timely reporting of rollovers). Once the child turns 18, standard IRA reporting rules apply.
Individuals interested in establishing a 530A account for their eligible child(ren) may want to consult a tax or financial professional to determine eligibility, contribution limits, and compliance requirements. For more information, visit IRS.gov.
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