Generally, when we save money for our children, we use vehicles like 529s, Custodial IRAs, UTMA/UGMA Accounts. The One Big Beautiful Bill Act (OBBBA), passed in 2025, created a new avenue: Section 530A Accounts, also known as Trump Accounts, which are tax-advantaged investment accounts for children. We’ll take a closer look to better understand the differences between these options and consider what may be the best choice for you and your family.
How 530A Accounts Work
These accounts can be opened for any child who does not turn 18 during the calendar year and has a Social Security Number. Under the current proposal, to open an account, you can either file IRS Form 4547 with your tax return, or with an online portal at trumpaccounts.gov that is expected to be available by mid-2026.
Almost anyone can contribute to a 530A account, as no earned income requirement applies. Common contributors include family members, friends, nonprofits, and employers. The annual contribution limit is $5,000, with that figure increasing alongside inflation starting in 2028. When either the parent’s or the child’s employer contributes, they can add up to $2,500; those contributions will count toward the annual limit, and it is not counted as taxable income for the employee.
Certain charities and government entities can also contribute without eating into the $5,000 annual limit. In addition, if your child was born between January 1, 2025, and December 31, 2028, the government will deposit a bonus $1,000 into the account. This perk does not count towards the yearly contribution limit. When your child turns 18, the account switches to a regular IRA with all the standard IRA withdrawal rules.
The plans’ investment lineups must be comprised of simple, low-cost index funds—the kind that follow major stock indexes like the S&P 500. The funds also cannot use debt, known in this case as “leverage,” to amplify results, and can’t charge more than 0.1% in fees.
Tax Treatment: Contributions, Growth, and Withdrawals
Contributions from individuals are made with after-tax dollars, and the money grows tax-deferred, meaning that after the child turns 18 and eventually decides to take money out, they must pay taxes on all the withdrawals from the IRA. Keep in mind that there are generally no withdrawals allowed from a 530A account, and once the child turns 18, the account is converted to an IRA. This means that early withdrawals before age 59 ½ may be subject to a 10% penalty.
The annual gift tax exclusion allows anyone to gift up to a certain amount each year without triggering gift tax reporting ($19,000 for 2026). However, for some very technical reasons, 530A contributions don’t qualify for the annual exclusion. What that would mean is even if you put in just $500, you’d have to file a gift tax return reporting that gift and use some of your lifetime estate tax exclusion. Since the lifetime gift exemption is $15 million per person in 2026, this won’t create a tax liability for most Americans, but it does add some additional complexity. As this was likely an oversight by Congress, the hope is this will be resolved either through regulations or a Congressional amendment.
Benefits and Considerations
Outside of the $1,000 gift if the child is eligible, if your plan is to open a 530A account and leave it until the child turns 18, this may not be the best account for you. However, if the child starts converting the money from the 530A account into a Roth IRA once they’re 18, this account can be an extremely powerful savings tool. Odds are, your child will be in a low tax bracket when they turn 18, so they will pay minimal taxes on the conversion. From that point on, the money is growing tax-free once it’s in the Roth IRA. And the best part? Your child does not even need to be working to do the conversion.
Although there are still more details coming out about 530A accounts, with the information we have now, it’s evident there are some phenomenal features that you may want to consider as part of your family’s financial plan.
Comparing These Accounts to Existing Options
With numerous savings and investment accounts available for minors, it’s hard to keep track of all the different benefits and features of the different options. Below is a summarized chart of the main account options and features.
| Feature | Section 530A (Trump Account) | 529 Plan | Custodial Roth IRA | Custodial Traditional IRA | UTMA/UGMA |
| Who Can Contribute | Anyone (no earned income required) | Anyone | Child (earned income required) | Child (earned income required) | Anyone |
| Contribution Limits | $5,000/yr (indexed) | High lifetime limits | Limited to earned income & IRA limit | Limited to earned income & IRA limit | No limits |
| Tax Treatment (Contributions) | After‑tax | After‑tax | After‑tax | Pre‑tax or after‑tax | After‑tax (irrevocable gift) |
| Tax Treatment (Growth) | Tax‑deferred | Tax‑free for education | Tax‑free if qualified | Tax‑deferred | Taxable annually |
| Withdrawals | No withdrawals before 18; IRA rules after | Tax‑free for education; otherwise taxed/penalized | Contributions anytime tax‑free; earnings taxed/penalized before 59½ | Withdrawals taxable; penalty may apply before 59½ | Must benefit child |
| Control at Age 18 | Converts to Traditional IRA; child gains control | Account owner unchanged | Full control transfers | Full control transfers | Full control transfers |
| Primary Purpose | Long‑term retirement savings | Education | Retirement | Retirement | General investing |
| Special Notes | Gov’t $1,000 for eligible children born 2025–2028 | SECURE Act 2.0 allows limited Roth rollovers | — | — | — |
Ultimately, there is not a one-size-fits-all solution when saving and investing for children. Each option comes with its own advantages and limitations. However, it’s important to understand the differences between the options to ensure your decision makes the most sense for your loved ones and their future. As the rules and guidance on these accounts change, and as new information comes out about Section 530A accounts, thoughtful financial planning can play a factor in ensuring you choose the strategy that best supports your child’s future.
Ready to build a comprehensive savings strategy for your children tailored to your unique financial situation? Reach out to our team, today.
Presented by Joshua Mergler
