What Are Trump Accounts (530A)? Should Parents Open One for Their Children?

Key Takeaways  

• Trump Accounts (530A) are tax-deferred savings accounts for children under 18, invested in broad U.S. index funds.  

• Children born between 2025 and 2028 qualify for a one-time $1,000 Treasury contribution.  

• Contributions offer no tax deduction, and gains are taxed as ordinary income, making them less efficient than 529 plans (education) and Roth IRAs (earned income). 

Thanks to a wave of recent promotions, including Super Bowl ads, clients with young children and grandchildren have been asking us if it makes sense to take advantage of the newly introduced Trump accounts, also known as Section 530A accounts.  

What is a Trump (Section 530A) Account and who qualifies? 

Trump Accounts, officially known as 530A accounts, were created as part of the OBBBA legislation passed in 2025 to promote early wealth building for children under the age of 18. As an added incentive, children born between January 1, 2025 and December 31, 2028 are eligible for a one-time $1,000 contribution from the Treasury. There are no household income limits or other restrictions in order to qualify. Just make sure you file IRS Form 4547 with your 2025 tax return in order to establish the 530A account and opt into the $1,000 contribution for your child.  

How do I open a 530A account?  

Parents or guardians can now start the process by filing IRS Form 4547 with their tax return or open the account electronically via TrumpAccounts.gov. Once filed, families will be contacted by a “partner financial firm” with further details about completing the account set up. The authentication process is expected to begin in May, according to Treasury guidance from December. Once a 530A account is established, the federal government’s seed funding is expected to arrive in July. Families can then make additional deposits into the account of up to $5,000 per year and employers can contribute up to $2,5000 annually per child. The employer contribution is not taxable to the employee, but is counted toward the annual $5,000 contribution limit per child.   

Based on the current rules and available guidance, our general advice for most families is as follows: Take advantage of the free $1,000 contribution from the Treasury if you have children born between 2025 and 2028. However, we’re generally not advising our clients to make additional deposits to their child’s 530A account because there are better, more tax-advantaged ways to help them save.  

Tax Implications of 530A Accounts

For starters, any growth in the 530A Account will be taxed as ordinary income upon distribution, but you don’t get a tax deduction for your contributions like you do with a traditional IRA or 401(k). Once your child turns 18, they own the account outright. However, if your child tries to take the money out before reaching age 59-1/2 they will have to pay tax on their gains, plus an early withdrawal penalty. (Note: the penalty could be waived for qualifying purchases such as higher education or a down payment on a home, but your child will still have to pay taxes on the gain.)

Because 530A accounts are taxes at ordinary income rates and because there are no tax deductions for contributing, they may be less tax-efficient than other savings vehicles. That being said, it’s still worth taking the $1,000 free contribution from the government to get the account started.  

Again, there is no tax deduction for contributing; gains in the account grow tax deferred, but the growth is taxed as ordinary income tax rates when your child takes the money out. Often ordinary income will be taxed at higher rates than the capital gain rates that most people would pay if they used custodial accounts. The same would be true if parents kept the money invested in a brokerage account in their name, then simply gifted the money to their child when they become an adult. 

Also know that a 530A account is not held at a specific custodian like your other accounts. They’re administered by a system set up by the government. The funds will essentially be invested in a broad-based U.S. index like the S&P 500 fund or ETF. You and your child can’t make your own self-directed investment decisions.   

Potential Benefits and Alternative Planning Opportunities 

There may be the potential for a young adult (over 18) to do a Roth conversion with his or her 530A account. Assuming the account was started for them at a young age, the money would continue to grow tax-deferred. Your child could convert the account to a Roth IRA by paying tax on the gain while they’re still in a presumably lower tax bracket. The timing for the Roth conversion would ideally be after age 24 – when they can no longer be claimed as a dependent on your tax return – but before they get too much older and start earning a higher salary and move into a higher tax bracket. 

Also, in December 2025, billionaire Michael Dell and his wife Susan pledged $6.25 billion to contribute $250 each to "Trump Accounts" for approximately 25 million American children aged 10 and under. The only catch is that the child must live in a zip code in which the median household income is under $150,000.   

If saving for education is a priority, a 529 educational savings account might be more efficient since a 529 offers tax-free growth, provided distributions are used for qualified educational expenses. Contributions to the 529 account can be substantially larger than a Section 530A account, which allows for greater tax-free income. The funds are not controlled by the beneficiary so the funds can be used for the intended purposes.

If your child has earned income from a summer job or part-time work, a Roth IRA may be a more powerful long-term savings vehicle. Contributions can be made up to the amount of the child’s earned income, and while there is no upfront tax deduction, the growth and qualified withdrawals are tax-free after the account has been open for five years and the owner reaches age 59½. Unlike 530A accounts, this allows decades of potential tax-free compounding. For families focused on long-term wealth building, a Roth IRA can offer significantly greater flexibility and tax efficiency.

Conclusion  

530A accounts for Children offer an appealing $1,000 government contribution for eligible births between 2025 and 2028, but the long-term tax treatment may limit their overall effectiveness. While the accounts provide tax-deferred growth, distributions are taxed as ordinary income and contributions are not deductible. For many families, alternatives such as 529 plans or Roth IRAs may offer greater flexibility and tax efficiency. As with any planning strategy, it’s important to evaluate how this option fits within your broader financial goals.

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Devin Starr, CFP®, EA — Associate Wealth Advisor at Novi Wealth