Parents, grandparents and others can now contribute to Internal Revenue Code Section 530A accounts — also known as "Trump Accounts" — to benefit eligible children. This new type of tax-advantaged savings vehicle was created by last year's One Big Beautiful Bill Act.
Now that 530A accounts have gone live, here's an overview of what anyone considering opening one should know, including the impact of recently issued IRS guidance addressing the gift tax rules.
A 530A account can be set up for anyone who'll be under age 18 at the end of the tax year and who has a Social Security number. Beginning July 4, 2026, contributions can be made to accounts for eligible beneficiaries.
In addition, U.S. citizen children born from January 1, 2025, through December 31, 2028, may qualify for an initial $1,000 government-funded deposit. If your child is eligible for the government contribution but you determine that another savings vehicle is better for your family, you should still seriously consider opening a 530A account. Even if you or other family members never make a contribution, the tax-deferred compounding growth on $1,000 can lead to a substantial balance over time.
A 530A account is essentially a type of IRA in which account funds can grow tax-deferred until withdrawn. But it's initially subject to special rules that don't apply to other IRAs. These rules are generally in effect only during the period that begins when the account is opened and ends December 31 of the year before the calendar year in which the child reaches age 18 — what's referred to as the "growth period." During this time:
Beginning January 1 of the year the child turns 18, most of the special growth-period rules cease to apply, and the traditional IRA rules generally take effect. Applicable traditional IRA rules include those regarding contributions, distributions, required minimum distributions (RMDs), taxation (including the 10% early withdrawal penalty) and Roth IRA conversions.
In late June, the IRS issued Revenue Procedure 2026-25, which, among other things, allows qualifying 530A account contributions to be treated as completed gifts rather than gifts of a future interest. Why does this matter? It means that your contributions may qualify for the gift tax annual exclusion and you may not have to file a gift tax return (Form 709) — but only if certain requirements are met.
Under safe harbor rules included in this IRS guidance, 530A account contributions will be eligible for the gift tax annual exclusion and you won't be required to file a gift tax return if all these requirements are met:
But if just one of the conditions isn't met, your contributions will be treated as gifts of a future interest, which means they won't be eligible for the annual exclusion and you must file a gift tax return for every account beneficiary who receives a contribution. The gifts can still be tax-free, but you'll have to apply your lifetime gift tax exemption — and your GST tax exemption if the GST tax also applies (generally when a gift is made to a grandchild or someone else two generations or more below you).
Unlike regular IRAs, 530A accounts must be created initially by the U.S. Treasury Secretary. To have an account established for your child, you must make an election. Also, as mentioned, the child must have a Social Security number before the election is made.
You can make the election by filing Form 4547, "Trump Account Election(s)," through the Trump Accounts app (available at trumpaccounts.gov) or through your online IRS Individual Account.
During the growth period, 530A accounts may receive several types of contributions in addition to those made by parents, other family members, friends or the children themselves. For example, an account can accept a "qualified general contribution" funded by states and political subdivisions, the federal government, Indian tribal governments, or certain nonprofits.
These contributions, which are funneled through the Treasury Department, can be made only to "qualified classes," such as children who reside in certain areas or were born in specific years. They don't count toward the annual contribution limit.
Employers can contribute up to $2,500 per year (adjusted for inflation after 2027) to the accounts of employees or their dependents, with contributions generally excluded from the employee's taxable income. The limit applies on a per-employee basis. However, employer contributions do count toward the annual contribution limit.
530A accounts might not be the best option for building savings for your child's education. Both Sec. 529 plans and Coverdell Education Savings Accounts (ESAs) also allow tax-deferred growth, but withdrawals for qualified education expenses are tax-free. On the other hand, 530A account distributions are taxed as ordinary income to the extent that they aren't attributable to after-tax contributions (though if used for education expenses, they may be eligible for an exception to the early withdrawal penalty).
Plus, tax-free 529 plan and ESA distributions can be used to fund elementary and secondary education expenses (subject to certain limits). 530A funds can't be withdrawn until the year the child turns 18.
There are other 529 plan advantages. Contributions may qualify for state tax deductions. And they aren't subject to an annual limit, provided they don't exceed the amount needed to cover the beneficiary's qualified expenses. (Note that gift tax rules might apply, depending on the contribution amount.)
Moreover, up to $35,000 of funds left in a 529 plan account for at least 15 years can be rolled over into the beneficiary's Roth IRA without incurring the normal 10% penalty for nonqualified withdrawals or resulting in taxable income. Roth IRAs don't have RMDs, and qualified withdrawals are tax-free. Certain restrictions on 529 plan rollovers apply, but this rollover option could be a significant advantage over 530A accounts, which eventually become traditional IRAs and would be subject to some tax if converted to a Roth IRA.
Investment options for 529 plans are limited to those permitted by the plan administrator, typically mutual funds and ETFs. But they may offer greater choice than 530A accounts. ESAs allow a wider range of investments, typically everything your broker offers. However, the maximum contribution to an ESA is limited to $2,000 per beneficiary per year, and contributors are subject to income-based contribution limits.
530A accounts can help eligible children build long-term wealth and give them a head start on retirement savings. They can prove useful well before retirement, too: Although penalties will generally apply to withdrawals before age 59½, there are exceptions, such as for first-time homebuyer expenses up to $10,000. Discuss with your tax and financial advisors how you might use a 530A account to your family's benefit.
Get in touch today and find out how we can help you meet your objectives.
