Federal policymakers can ensure Trump accounts do not exacerbate inequality in the United States

Key Takeaways

U.S. citizens under the age of 18 are now eligible for a new asset development account, called 530A accounts or Trump accounts. Children born between 2025 and 2028 also are eligible for an initial seed funding of $1,000 for the accounts from the federal government.
Policymakers need to take immediate action to ensure that all children who qualify for the funds can receive them. Policymakers must also clarify that obtaining a 530A account does not prevent any child from receiving public benefits they may otherwise qualify for, such as food assistance or health care.
Long term legislative changes to the administration of 530A accounts would further improve the program’s reach and impact.
The Notice of Proposed Rulemaking on 530A accounts issued by the IRS in March presents an opportunity for policymakers to improve the administration of 530A accounts.

Overview

In July 2025, Congress passed a federal budget bill (Public Law 119-21, also commonly known as the One Big Beautiful Bill Act) that, among other things, established a new type of asset-building account for U.S. children. These so-called Trump accounts, or 530A accounts (also referred to 530As) are available to all U.S. citizens under the age of 18. For all citizens born between 2025 and 2028, the bill also included $1,000 of seed funding for 530As provided by the federal government. The administration has announced that the accounts will launch on July 4, 2026 but did not specify additional details.

Neither 530A accounts nor the $1,000 contribution pilot program are modeled after programs with an evidence base for addressing wealth inequality. Nevertheless, they were signed into law and are on the verge of implementation, which makes it critical to ensure that these accounts are inclusive and effective at closing the U.S. wealth gap that has only grown in recent decades.

Supporters of 530As claim that these new accounts and the federally provided seed funds will “jumpstart the American Dream” for all the nation’s children, but that goal may be prevented unless important program implementation details are addressed—and soon. There are two immediate fixes that policymakers must address. First, many eligible children are likely to be left out of the program due to enrollment barriers, such as requiring enrollment through the tax-filing system, in which some households do not participate because their incomes are too low. These barriers could prove particularly restrictive for children in families with few financial resources—those who would benefit most from the program. Establishing automatic enrollment is the most efficient way to promote full participation.

Second, as enumerated in the budget bill, the program does not explicitly consider how funds in a 530A account might interact with asset limits for means-tested public benefit programs. Despite language in a U.S. Senate Finance Committee Report that asserts 530A accounts should not count toward asset limits for means-tested transfer programs while the account beneficiary is under the age of 18, this guidance was not included in the final law or the preliminary rule from the U.S. Department of the Treasury when it established the accounts. If 530A accounts are not specifically removed from the calculation of asset limits, then enrolling in a 530A could potentially prevent children or their families from accessing necessary supports and services for which they would otherwise be eligible, including health care and nutrition support.

This issue brief will review what we know about 530A accounts, including the treatment of contributions and withdrawals, and considerations for state and federal policymakers both in the short run and the longer term. If policymakers do not act, 530A accounts and the pilot federal contribution program may further entrench wealth inequality in the United States.

Administrative and tax details of 530A accounts

The Treasury Department estimates that 73 million children in 44 million families may be eligible to open a 530A account. Together, 530A accounts and the pilot contribution program are expected to cost $15 billion to $17 billion over the next 5 years. That estimated cost would rise to $37 billion over 10 years if Congress decides to make the pilot contribution program permanent after 2028.

These new asset development accounts were designed to behave similarly to individual retirement accounts. Up to $5,000 per year (indexed for inflation) can be added by the account owner (parents or guardians until their children turn 18, at which point the account is transferred to the child) or other individuals. Funds contributed by the government, including the $1,000 pilot program contribution, and by nonprofits do not count toward the $5,000 annual limit. Until the child turns 18, the funds can only be invested in eligible investments in the stock market—specifically, qualified indexes such as the S&P 500 stock market index or similar indexes that are composed of equity investments in primarily U.S. companies.

There are several complicated steps for families to establish a 530A account for their child or children. A parent or legal guardian must first open a 530A account by filing IRS Form 4547 (the Trump Account Elections Form) for any eligible children, and they must do so when filing their federal income taxes each year. Account custodians have been told by the Trump Administration that they will receive additional instructions to complete their account set-up, but it is unclear when or how that will happen. The Treasury Department recently announced that Bank of New York Mellon Corporation (in partnership with Robinhood Markets, Inc., an online trading platform) will initially host the 530A accounts but has not yet clarified whether families will be able to transfer accounts to other financial institutions.

Children who qualify for the pilot federal contribution program—U.S. citizens born between 2025 and 2028 with a Social Security Number—will receive a $1,000 deposit in their 530A accounts. Though the Treasury Department has not shared specific guidance for employer contributions yet, employers will be able to contribute up to $2,500 a year to an account managed by their employees—up to half of the account’s annual contribution limit—and that those contributions may not be treated as employee-taxable income. Unlike individuals’ contributions to 530A accounts, employer contributions are tax exempt.

Withdrawals from a 530A account after a child turns 18 are taxed as income. Funds pulled out before the account owner turns 59.5 years old are subject to a 10 percent tax, or early withdrawal penalty, with exceptions in certain circumstances, including qualified higher education expenses or up to $10,000 for qualified first-time homebuyers. Withdrawals from the account before the child turns 18 are not allowed, with limited exceptions. At the time of writing, some administrative aspects and tax treatment of 530A accounts are still under consideration by the Treasury Department as part of the federal rulemaking process, particularly program details that Congress did not specify under the legislation that established the accounts.

529 savings plans shed light on how 530As could impact U.S. families

The new 530A accounts are one of many tax-advantaged savings accounts available to households and one of the newest asset development accounts intended to enable children to accumulate savings assets. In addition to 530As, a range of tax-advantaged savings accounts are available to many U.S. families, including but not limited to health savings accounts, 529 qualified tuition savings plans, and individual retirement accounts.

Though these accounts are ostensibly meant to reduce the wealth gap in the United States, it is possible that they could widen these disparities. A working paper analyzing administrative data from Illinois’ state 529 program, a tax-advantaged savings account program for education expenses, provides some insight into how families might utilize 530A accounts if administrative changes are not made. Over the past decade, only 11 percent of Illinois children were beneficiaries on 529 accounts, primarily concentrated among higher-educated families in high-wealth ZIP codes. In addition to only reaching a small proportion of eligible children, the study also found drastic disparities among account holders: In 2023, the top 5 percent of account owners held nearly 30 percent of all deposits, almost $5 billion, while the bottom half held only 8.3 percent of all deposits, roughly $1.4 billion.

Underlying factors which led to savings disparities identified in the 529 account study could foreshadow similar trends in 530A accounts. Families struggling to cover their current living expenses are unlikely to have the excess funds necessary to contribute to 530A accounts, which could serve to widen wealth inequality. In 2024, only 63 percent of adults reported they could cover an unexpected and hypothetical $400 emergency expense, according to the Federal Reserve Board. Low savings and experiences of financial strain are not unique to low-income families. Indeed, research suggests as many as 1 in 4 U.S. families may suffer a large income disruption in a given year, such as the involuntary loss of jobs.

Beyond household income and discretionary funds, differences in financial literacy could also exacerbate wealth gaps. Choosing an optimal savings strategy requires a degree of financial savvy, as does navigating the complex tax code to reduce taxable income and avoid penalties.

Considerations for state and federal policymakers

Public investments in children have the highest returns in the form of long-term social benefits, including better health, education, and economic outcomes—particularly when targeted to low-income children. Research on programs such as the Supplemental Nutrition Assistance Program that addresses childhood hunger and the Children’s Health Insurance Program or Medicaid for children shows how they can support children’s development and set them on a path for future success.

To maximize the potential of 530A accounts, key design elements of a universal and progressive child development account model should be integrated. The accounts will be limited in their impact, and may even exacerbate wealth inequality, if they do not incorporate evidence-based features that promote inclusion and sustainability, including:

Universal eligibility for all U.S. children
Automatic enrollment for all eligible children
Automatic initial deposit of $1,000 from the Treasury Department
At-birth start, meaning the accounts are opened automatically as soon as a child is born
Automatic progressive subsidies, with larger initial and annual deposits for children from low-income families and smaller deposits for children in higher-earning families
Excluding the funds from means-tested public benefits, to ensure families’ government-enabled savings do not keep them from accessing the services they may need

Some of these features can be implemented by the Treasury Department, while others would require action and additional funding by Congress.

Below, we detail two initial actions policymakers should address quickly due to their time-sensitive nature. Policymakers must first implement automatic enrollment to ensure all children eligible for the pilot contribution program receive the funds as soon as possible. The Treasury Department estimates that even a 6-month delay in investing $1,000 after birth could mean a difference of $300 in the account balance by the time the child reaches adulthood. Policymakers also need to clarify that participation in public benefit programs—and specifically means-tested transfer programs—will not be impacted by a child’s 530A account, as some of these accounts could cross asset limit thresholds in the coming months based on announced corporate and philanthropic commitments.

Automatic enrollment

Automatic enrollment is a necessary component of evidence-based asset development programs and is well-studied as one way to relieve the administrative burden of enrollment. Though all babies born in the United States between 2025 and 2028 are eligible for a 530A account and for the pilot contribution funding, the IRS announced in its Notice of Proposed Rulemaking that automatic enrollment is not currently possible without coordination with other federal agencies, including the Social Security Administration.

This would be a costly mistake if it is not addressed in the current comment period. There is evidence that administering these programs with automatic enrollment ensures millions of eligible children will not miss out. Maine’s “My Alfond Grant,” for example—a $500 grant for newborns whose parents opened a Maine NextGen 529 account—began in 2008 with an opt-in structure. But after 5 years, only 40 percent of eligible families in the state had created accounts and claimed the grant funds, and those who missed out were largely from low-income families. In 2014, Maine began automatic enrollment using state birth records and included retroactive 2013 births, resulting in 100 percent participation and no recruitment costs.

Requiring registration for a 530A account as an additional step in federal tax filing—as is currently the case with 530As—also presents a barrier. There may be times when low-income households do not have a federal tax obligation: A single parent or married couple with children earning less than between $23,625 and $31,500, respectively, in 2025 is not required to file a federal tax return, for example. An estimated 3 percent to 12 percent of children in the United States could be unclaimed on tax returns due to their parents having earnings lower than the filing thresholds.

Automatic enrollment would resolve the filing barrier. Researchers at Washington University in St. Louis have put forth proposals to support the Treasury Department in implementing automatic enrollment in 530A accounts by establishing a partnership with the Social Security Administration.

Interactions with public benefit programs

For 530A accounts to achieve their stated goal of jumpstarting the American Dream, policymakers also must make sure that the program is not at odds with children’s basic needs. This will require, at the very least, that 530A accounts do not trigger asset limits for children and their families to access public benefit programs such as nutrition assistance or Temporary Assistance for Needy Families.

The legislation that established 530A accounts does not explicitly state that these accounts are excluded from asset test thresholds for participation in public benefit programs. Yet the language in the U.S. Senate Finance Committee Report demonstrates congressional intent to exclude 530As in asset limit calculations for means-tested transfer programs while the account beneficiary is under 18. The Treasury Department did not include mention of 530A account interactions with means-tested transfer programs in the program’s full Notice of Proposed Rulemaking.

Unless the Treasury Department issues guidance directing states to exclude 530As from state asset limits to reflect congressional intent, states could deny families access to public benefit programs. The Supplemental Nutrition Assistance Program, for example, has a household asset limit of $3,000 for participants in states that have not expanded eligibility for the program. Under current law, a child’s 530A account could ostensibly count toward their household’s total assets and cause families to be denied their needed SNAP benefits.

Fortunately, 530A accounts can follow examples from other programs, including 529 plans whose assets are not counted toward SNAP asset limits, to inform policy changes that ensures families’ access to necessary public benefit programs.

Conclusion

Unless action is taken to correct course, the new 530A accounts and the federal contribution pilot program are likely to exacerbate existing inequalities, as families with the financial means to contribute to their children’s accounts are more likely to do so. And if 530A accounts are not explicitly excluded from asset limit tests, then families with children in low- or moderate-income households will also have to consider the trade-off between claiming 530A accounts for their children and forgoing more immediate help.

The legislation that established 530A accounts also enshrined cuts to hunger and nutrition support programs and the nation’s health care program that supports low-income families. Unless clarified, the lack of official guidance issued by the Treasury Department on how 530As interact with asset thresholds for public benefits programs could prevent even more families from accessing necessary support systems.

Absent action by the executive branch during the current Notice of Rulemaking period, Congress could also engage the Treasury Department to implement automatic enrollment, or direct them to do so legislatively. Congress could likewise clarify that 530A accounts do not count against asset limits for other means-tested programs by explicitly including the language from the Senate Finance Committee Report in legislation. A statutory provision that explicitly excludes 530A accounts from asset calculations could help to prevent future ambiguity.

530A accounts and the companion seed-funding program present a first step toward a universal, federal-level asset building program for children. But optimizing their potential within the current program design will require action to ensure that the accounts do not unintentionally widen wealth inequality in the United States. Policymakers still have time to act at the state and federal level before the accounts go live in July 2026 to ensure all eligible children can benefit from this wealth-building opportunity.

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