Treasury proposes tax-free contributions for child ‘Trump accounts’

The U.S. Treasury Department has proposed a rule that would allow parents to make tax-free contributions of up to $2,500 per year into child-owned ‘Trump accounts’ through payroll deductions. These accounts, formally known as Section 530A accounts, are designed for broad long-term savings, including qualified education, home expenses, and retirement.

Children born between January 1, 2025, and December 31, 2028, are eligible to receive $1,000 in federal seed money for investments. While any child under 18 can hold an account, only those born within that specific window receive the federal contribution. The program also permits employers to contribute up to $2,500 annually toward an employee’s child’s account, contributing to a total annual limit of $5,000 from all sources.

Unlike 529 plans, which are parent-owned and primarily focused on education, Trump accounts are legally owned by the child, though they cannot access the funds until age 18. Investment options for these accounts are expected to be limited to a selection of broad U.S. equity index investments. The rule is expected to be finalized following a public comment period ending September 25 and a public hearing on October 15.