The Working Families Tax Cut Act (formerly the One Big Beautiful Bill) created a new savings account called a Trump Account, also known as a 530A account. These are investment-style savings accounts for children under 18, funded with after-tax contributions.
What it is
A parent or guardian (the “responsible party”) opens and manages the account until the beneficiary turns 18. Contributions can come from parents, family members, or employers, up to annual limits. Funds generally cannot be withdrawn until the child turns 18.
The IRS refers to the account manager as the “responsible party.” This person may:
- Select eligible investment options
- Request rollovers, including to another Trump Account or to an ABLE account
- Name a successor responsible party
Trump Accounts vs. 529 plans and traditional IRAs
A Trump Account is a hybrid between a custodial traditional IRA and a 529 plan. Unlike a traditional IRA, the child does not need earned income to receive contributions, and almost anyone can contribute. Unlike a 529 plan, funds are not limited to education expenses.
The $1,000 newborn contribution
Children born in tax years 2025 through 2028 are eligible for a one-time $1,000 seed contribution from the federal government, deposited after birth. Parents must elect this by filing Form 4547, Trump Account Election(s), either with a tax return or through an IRS Individual Account (or at trumpaccounts.gov). Parents can still contribute on top of the $1,000, up to the annual limit.
Who qualifies
- Child must be under 18 for the entire calendar year
- Child must have a valid Social Security number
- A parent or guardian must open (or opt into) the account — no citizenship/SSN requirement for parents
- To receive the $1,000 federal contribution, the child must be a U.S. citizen born between 2025 and 2028
If a parent or guardian is unavailable, proposed rules allow these individuals to open an account, in order of priority: legal guardian, parent, adult sibling, grandparent.
Contribution rules
- Individuals can contribute up to $5,000 per year (combined total) per child, with after-tax dollars
- Contributions are not tax-deductible before the year the child turns 18, under current guidance
- Employers can contribute up to $2,500 per year, tax-exempt; this currently counts toward the $5,000 annual limit
- Tax-exempt entities (charities, governments, private foundations) can contribute tax-free without counting toward the $5,000 limit
- Excess contributions above $5,000 (subject to the exceptions above) must be removed from the account
- Starting in 2028, the $5,000 limit increases with inflation
- No new contributions can be made in the year the child turns 18
Withdrawals
Distributions generally cannot be taken until the year the child turns 18. At that point the account is expected to convert to a traditional IRA in the child’s name, though final IRS guidance on taxation of withdrawals has not been issued.
After conversion:
- Only the account owner (the now-adult child) can contribute, and only with earned income
- Contributions after this point may be tax-deductible depending on income and filing status
- Funds continue to grow tax-deferred through eligible investments (mutual funds, ETFs, index funds)
Early-withdrawal exceptions
Like an IRA, withdrawals before age 59½ are generally subject to a 10% early-withdrawal penalty plus ordinary income tax, unless an exception applies:
- Higher education expenses
- Birth or adoption of a child
- Down payment for a first-time home purchase
If the child dies, funds can typically be withdrawn or transferred to another eligible beneficiary without penalty. If the child becomes disabled, the account may be rolled into an ABLE account.
How to open a Trump Account
File IRS Form 4547, Trump Account Election(s), with a federal tax return or through an IRS Individual Account. The deadline to open an account for a child is Dec. 31 of the calendar year the child turns 17.
Account requirements
- Must be opened for a U.S. citizen under 18 with a valid Social Security number
- Must invest in low-cost stock mutual funds or ETFs tracking a U.S. stock market index (e.g., S&P 500)
- Must follow annual contribution and age-based rules
- Must be opened through a valid Form 4547 election by an authorized individual
FAQs
How do Baby Bonds differ from Trump Accounts? Baby Bonds don’t exist federally; Connecticut is the only state offering them statewide, and Maine offers a similar $500 grant (the Alfond Grant) invested in a NextGen 529 account. Trump Accounts are investment-based, funded mainly by parents/employers, not ongoing government deposits — though eligible newborns (2025–2028) get a one-time $1,000 seed deposit.
What’s the difference between a 529 and a Trump Account? A 529 plan is limited to education expenses with tax-free qualified withdrawals. A Trump Account has no spending restriction once the owner reaches 59½.
Can I withdraw before the child turns 18? In most cases, no — except if the child dies (funds can be withdrawn or transferred) or becomes disabled (may roll into an ABLE account).
Are contributions tax-deductible? Not before the year the child turns 18, under current guidance. Contributions are likely to be tax-deductible after that if IRS eligibility rules are met.
This article is for informational purposes only and not legal or financial advice.
Form 4547 availability may vary by tax preparation product. All terms and conditions of the applicable tax product apply.