Within the One Big Beautiful Bill Act, the Working Families Tax Cuts establish parameters for newly created 530A accounts, commonly referred to as Trump Accounts. These accounts are structured similarly to individual retirement accounts (IRAs), with one key difference: there is no requirement for earned income during the growth stage.
Funding for these accounts becomes available on July 5, 2026, for children under the age of 18. A key component is a pilot program under which the United States Treasury will deposit $1,000 into each eligible account as seed money. To qualify, the child must be a United States citizen with a valid Social Security number and must be born between January 1, 2025, and December 31, 2028. Additional support is expected from various corporations and high-net-worth individuals.
Although not required, contributions of up to $5,000 per year may be made by friends, family members, and employers. Certain contributions, including the government seed money and qualifying nonprofit donations, will not count toward the annual maximum. Because these accounts are newly established, additional guidance from the Internal Revenue Service is expected.
Establishment of the Account
Enrollment is designed to be straightforward. A parent or legal guardian may file Form 4547 when submitting their personal income tax return or enroll through an online portal expected to open by summer 2026.
Once the application is received by the designated financial institution (to be selected by the U.S. Treasury), the parent or guardian will be notified of the next steps. Activation procedures are expected to be available in May 2026. The child is designated as the account beneficiary, while the parent or guardian serves as custodian until the child reaches age 18.
The Growth Period
Trump Accounts enter the growth period upon opening and remain in that phase until December 31 of the year preceding the child’s 18th birthday. During the growth period, the account is generally locked, with limited options for moving funds.
Permissible transactions during this phase include trustee-to-trustee rollovers, rollovers to a 529A account (commonly known as an ABLE account), refunds of excess contributions, or distributions due to the death of the beneficiary.
Contributions from the United States Treasury, corporate donors, and employers are made on a pre-tax basis. Individual contributions are made on an after-tax basis. During the growth period, assets must be invested in domestic indexed exchange-traded funds (ETFs) or mutual funds. These funds are required to maintain very low annual fees, capped at 0.1 percent, and may not use leverage.
Although cash holdings and money market funds may be used temporarily for processing contributions or rebalancing, they are not permitted as long-term investment options.
When the Child Turns 18
At age 18, funds become accessible and distribution rules begin to resemble those of a traditional IRA. Withdrawals of pre-tax contributions and earnings (on both pre-tax and after-tax contributions) taken between ages 18 and 59 ½ will be subject to ordinary income tax. In most cases, a 10 percent early withdrawal penalty will also apply.
However, the 10 percent penalty may be waived for qualified expenses, such as higher education costs or a first-time home purchase.
Although after-tax contributions may be withdrawn without additional income tax, distributions must be taken proportionally. This means the account holder cannot withdraw only after-tax contributions; each distribution will consist of both taxable and non-taxable amounts.
After age 18, Roth conversions are permitted. This strategy may allow after-tax funds to grow tax-free in the future, depending on individual circumstances. Normal distribution rules apply once the child reaches age 59 ½.
As always, it is important to consult a tax or investment professional before making these important decisions.
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