What are the contribution limits and tax rules for Section 530A (Trump) accounts?
Executive summary
Section 530A “Trump” accounts are a new, IRA-like, tax-advantaged savings vehicle for U.S. citizen children that cannot receive contributions before July 4, 2026 and generally carry a $5,000 annual aggregate contribution cap (excluding certain “exempt” contributions) for 2026–2027, with that cap indexed thereafter; the accounts follow many traditional IRA tax rules during and after the growth period but include special limitations and reporting during the child’s minority (the “growth period”) [1] [2] [3]. The IRS/Treasury notice and related analyses make clear there are distinct categories of contributions (personal, employer, government/charitable, pilot $1,000 seed grants, and rollovers), special timing rules for when a contribution counts, and different tax treatment and reporting obligations than ordinary IRAs while the child is under 18 [4] [5] [6].
1. What the contribution limits actually are
The core statutory cap for non‑exempt aggregate contributions to a Section 530A account is $5,000 per year for 2026 and 2027, after which the $5,000 figure is subject to cost‑of‑living adjustments; certain contributions are defined as “exempt” and therefore do not count against that annual limit [2] [3] [7]. Exempt contributions include qualified rollover contributions, the pilot program $1,000 federal seed grant, and qualified general contributions from states, tribes, or 501(c) organizations, while employer contributions and family contributions are treated as part of the $5,000 cap unless otherwise designated exempt [4] [6] [8].
2. Who can contribute and special sub‑limits
Multiple parties may fund a child’s Trump account — parents, relatives, employers, state/tribal governments, and charities — but the notice creates sub‑rules: for example, employer contributions (including payroll contributions) count toward the $5,000 aggregate limit and in practice the IRS guidance contemplates operational sub‑limits such as an employer contribution cap in industry commentary (commonly cited as $2,500 per year in practitioner summaries), though the statutory text’s primary limit remains the aggregate $5,000 [6] [8] [3]. The Treasury also carved out the pilot one‑time $1,000 federal contribution for eligible children born in a specified window, and that seed payment is explicitly excluded from the $5,000 cap [9] [5] [2].
3. Timing rules — when a contribution “counts”
Unlike typical IRAs where a contribution can be allocated to the prior tax year, Section 530A suspends the usual Section 219(f) rule for the growth period so that a contribution is counted for the calendar year in which it is made; for example, a deposit on January 31, 2027 is counted for 2027 and cannot be applied to 2026 [2]. The statute and IRS notice also forbid accepting any contribution before July 4, 2026 and require trustees to prevent contributions that would exceed annual limits during the growth period [2] [3].
4. Tax treatment of contributions, earnings, and distributions
Personal contributions are made with after‑tax dollars and establish basis in the account, while investment earnings grow tax‑deferred inside the account; distributions generally follow traditional IRA rules — taxed as ordinary income to the beneficiary with potential 10% early‑withdrawal penalties before age 59½ unless an exception applies — and required minimum distribution rules apply once IRA rules take over after the growth period [5] [4]. Rollovers that qualify (including certain ABLE rollovers described in the code) are not includible in gross income, and the pilot seed grant is excluded from income as a governmental contribution [7] [5] [9].
5. Reporting, trustee duties, and operational limits during the growth period
During the growth period Trump accounts are exempt from standard IRA reporting under section 408(i) and instead are governed by new section 530A(i), which requires trustees to identify sources of contributions and provide annual reports to both the IRS and the beneficiary; trustees must also ensure investments are limited to “eligible investments” and may face additional procedural obligations to prevent excess contributions [4] [2] [3]. Once the child turns 18, normal IRA reporting and rules resume [10].
6. Competing perspectives, implicit agendas, and practical implications
Supporters frame Section 530A accounts as a way to seed long‑term savings for children and to leverage public and private contributions, pointing to the $1,000 pilot grant and tax‑deferred growth as benefits [9] [5], while critics warn the accounts’ investment restrictions, complex reporting, and interaction with employer payroll systems create administrative burdens and potential inequities [8] [4]; industry guidance already highlights planning issues such as coordination with IRAs and employer contributions, and the IRS will accept public comments before final regulations, indicating rules could evolve [8] [10].