The best money in your kid's Trump Account isn't yours.

Section 530A came out of the One Big Beautiful Bill Act, signed July 4, 2025. The statute blocks any contribution until 12 months after enactment, which is why July 4 of this year was the starting gun. The annual cap is $5,000 per child, indexed for inflation after 2027 and rounded to the nearest $100. Separately, there is a pilot contribution of $1,000 from the federal government for children born after December 31, 2024 and before January 1, 2029, and that $1,000 does not eat into the $5,000.

The lockup is real. No distributions before the first day of the calendar year the beneficiary turns 18. No hardship exception, no tuition exception. On that date the account becomes a plain traditional IRA and your child, now an adult, controls it.

IR-2026-90 laid out how employers can fund these. A company that sets up a qualifying program can contribute up to $2,500 a year and you exclude it from gross income, with the cap set at $2,500 for 2026 and 2027. Read the fine print on that number: the limit is per employee, not per dependent. Three kids still means one $2,500 exclusion, split however you like. The rules also open a pre-tax salary reduction through a section 125 cafeteria plan, so you can route your own paycheck money in before tax, but only into a dependent's account, never your own. Treasury says more than 50 companies have committed to contributing.

Two things to keep straight. The exclusion is from income tax only. Those contributions generally stay subject to Social Security and Medicare payroll taxes. And employer money counts inside the $5,000 ceiling rather than stacking on top of it, so $2,500 from work leaves $2,500 of room for everyone else. Run the numbers on the employer piece alone: $2,500 a year for 18 years is $45,000 contributed, and at a 7% average annual return it lands near $85,000, with the $1,000 seed adding roughly $3,400. That 7% is an assumption, not a promise. These are still proposed regulations, with comments due September 25 and a hearing October 15, so the practical move is asking HR whether a program is coming for 2027.

IR-2026-96 restricts what the money can sit in. Eligible investments are mutual funds and ETFs that track an equity index of primarily U.S. companies, the S&P 500 being the example the IRS uses, that do not use leverage, and that charge annual fees and expenses of no more than 0.1% of the fund balance. The restriction covers the growth period, from account opening through December 31 of the year the beneficiary turns 17.

That rule exists because an account nobody can withdraw from for 18 years is exactly the kind of captive money that gets parked in an expensive product. A 0.1% ceiling forecloses that. One gap worth knowing: the cap applies to the fund's fees and expenses, not to trustee fees, so the custodian can still charge you separately. Read the account agreement, not just the expense ratio. Comments on this set close October 20.

No deduction is allowed for contributions made before the beneficiary turns 18. Your own money goes in after tax. Then the account is treated as an IRA under section 408(a), which means the earnings come out as ordinary income whenever they come out, and a withdrawal before 59½ picks up a 10% penalty on the taxable part. So the dollars you contribute get no break going in and their growth gets taxed coming out.

Compare that honestly. Money in a 529 spent on school comes out tax-free. A custodial Roth IRA, available the moment your kid has earned income from a summer job, also comes out tax-free. On taxes alone, both beat a Trump Account funded with your own dollars. The free money is a different calculation entirely. Your basis in the government's $1,000 and your employer's $2,500 is zero, so mediocre tax treatment on a gift is still a gift, and 18 years of compounding is 18 years of compounding.