What Should a Dentist Consider Before Accepting a DSO Offer?
Trump Accounts, created under Section 530A, introduce a new tax-advantaged savings option designed to help eligible children build wealth for the future.
Understanding who can open and contribute to these accounts, how the funds are taxed, and how they compare with options such as 529 plans and Roth IRAs can help families evaluate where they fit into a broader savings strategy.
A Trump Account is a new type of individual retirement account created by the One Big Beautiful Bill Act (OBBBA) and codified in Section 530A. It is established for the exclusive benefit of an eligible child and follows traditional IRA rules, with restrictions during the child’s “growth period.” Contributions may be made beginning July 4, 2026. During that period, investments generally must be low-cost mutual funds or ETFs tracking broad indexes of primarily U.S. companies, and distributions are tightly restricted. The annual contribution limit is generally $5,000, with inflation adjustments beginning after 2027. Earlier versions were also described as MAGA accounts, but the enacted law uses Trump Account terminology.
A child is eligible if an election is made before the calendar year in which the child turns 18 and the child has a valid Social Security number. A parent, legal guardian, adult sibling or grandparent may make the election, subject to IRS priority rules. Only one initial Trump Account can be opened for each child. Anyone may contribute, while employers may contribute up to $2,500 annually, generally within the $5,000 overall limit. Children born from January 1, 2025, through December 31, 2028, who are U.S. citizens with valid SSNs may also qualify for a one-time $1,000 Treasury contribution if the required election is made on time.
Personal contributions to Trump accounts are generally made with after-tax dollars, so the contributor receives no federal income tax deduction. Those contributions create basis in the account, while investment earnings grow tax-deferred. Employer contributions of up to $2,500 may be excluded from the employee’s taxable income, but they count toward the annual contribution limit. The $1,000 Treasury pilot contribution and qualified general contributions do not count toward that limit and generally do not create tax basis. After the growth period, distributions are taxed under traditional IRA rules. The portion attributable to basis is generally not taxable, while earnings and other pre-tax amounts are included in income when distributed.
Before the growth period ends, a Trump Account generally cannot be used for expenses, even education or a first home. Limited exceptions include qualified rollovers, certain ABLE account rollovers, corrective distributions of excess contributions and distributions after the beneficiary’s death. Starting January 1 of the calendar year in which the child turns 18, traditional IRA distribution rules generally apply. Withdrawals may then be used for any purpose, but taxable amounts withdrawn before age 59½ may face a 10% additional tax unless an exception applies. Exceptions can include qualified higher education expenses and certain first-home purchases. In other words, “qualified use” usually affects the penalty, not whether a withdrawal is allowed.
A children savings account strategy may include more than one vehicle because each solves a problem. A 529 plan is designed for education, with tax-free qualified withdrawals and a Roth IRA rollover of up to $35,000 if statutory conditions are met. A Roth IRA for a minor can provide tax-free growth, but the child must have compensation, and the 2026 IRA contribution limit is $7,500 or earned compensation, if lower. A Trump Account does not require earned income during the growth period and may include the $1,000 federal contribution, but access is restricted before 18. An 83(b) Election concerns restricted property taxation, not these savings accounts.
For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact Jonathan Swartz, partner in charge of Bennett Thrasher’s Personal Financial Services practice, or call us at 770.396.2200.
Back to Q&A
Never miss an update. Sign up to receive our monthly newsletter to unlock our experts' insights.
Subscribe Now