A Trump Account (530A) does not produce a tax bill for a family in an ordinary year – but that is deferral, not exemption. Per IRS Notice 2025-68, a Trump Account is a traditional IRA under section 408(a), which sets the shape of everything else: nothing goes in deductible, nothing is taxed on the way up, and the earnings are ordinary income on the way out.
Why nothing is taxable in the meantime
Two rules do most of the work. The first is that money arriving in the account is not income to the child. Per Notice 2025-68, contributions during the growth period "are not includible in income by the account beneficiary when made" – the $1,000 seed included. The trade is that nobody deducts anything for putting money in: the notice states that "no deduction by an individual is allowed under section 219 for any contribution to a Trump account."
The second is that almost nothing can come out. During the growth period, the only permitted distributions are a rollover to another Trump Account, a rollover to an ABLE account in the year the child turns 17, a distribution of excess contributions, and a distribution after the account beneficiary's death, per the notice. A tax bill generally needs a taxable event, and the account is built so that ordinary years do not have one. The exception is that last item: per section 530A(d)(6), a death during the growth period is treated as a distribution, with the account's value reduced by basis taxed to whoever acquires it.
That differs from a plain taxable account in a child's name, where dividends and realized gains can be taxable to the child year by year – the reason the IRS publishes Form 8615 for a child's tax on unearned income.
Which dollars come back out untaxed
The word to know is basis – the part of the account already taxed, which will not be taxed again.
Per Notice 2025-68, contributions from other sources – the child, the child's parents, or any other person – create basis in a Trump Account. Pilot program contributions (the $1,000 federal seed), qualified general contributions (a state or charity per-child program) and section 128 employer contributions do not create basis. A qualified rollover from a prior Trump Account carries over whatever basis came with it.
Read forward twenty years: a parent's own deposits come back out untaxed, while the seed, the state or charity money and the employer's match are taxable when withdrawn, along with the growth on all of it. Our earlier coverage of what counts toward the $5,000 annual limit sorts the same categories by a different test – and the two do not line up, because a contribution can sit outside the annual limit and still be fully taxable later.
What gets reported each year, and by whom
The trustee does the reporting, not the family. Per the notice, section 530A(h)(1) switches off the usual IRA reporting rules of section 408(i) while the child is a minor, and section 530A(i) puts a different set in their place: the trustee reports the contributions accepted, the distributions, the account's fair market value and its basis to the IRS and to the account beneficiary – down to the amount and source of any contribution over $25 from someone other than the Treasury Secretary, the beneficiary, or the child's parent or legal guardian. What that statement will look like is not settled: per the notice, "Forms and instructions regarding such annual reporting will be issued in the future."
When the tax actually arrives
The growth period ends on January 1 of the calendar year the child turns 18, and from there the traditional IRA distribution rules of section 408(d) apply, per the notice. Amounts allocated to basis are not includible in gross income; everything else, "including all earnings of the account," is included when distributed. A distribution may also carry the section 72(t) 10% additional tax on early distributions if no exception applies – the notice names qualified higher education expenses, a first home purchase, and distributions made after age 59½.
One detail rewards attention: the basis math is done inside the Trump Account alone. Per the notice, section 408(d)(2) is applied separately, so the untaxed share of a withdrawal is figured from that account's own basis and value – and Trump Accounts are disregarded when the same calculation runs on a person's other IRAs. Our reporting on what happens when the account holder turns 18 covers the rest of the handover.
How this differs from a 529 plan
A 529 plan runs the same deferral to a different destination: earnings are not taxed along the way, and qualified withdrawals come out free of federal income tax, which our colleagues at SavingForCollege.com walk through in detail. Contributions are not federally deductible there either, though many states offer a deduction or credit of their own.
A Trump Account never reaches tax-free. It defers, then taxes the earnings as ordinary income whenever they come out. A family may hold both – but the two answer different questions, and a dollar's treatment follows the account it lands in.
Employer, state and charity dollars are the ones that arrive without basis, so it is worth knowing which of those programs may reach a particular child. The Match & Bonus Finder lists the programs we have sourced, with the sponsor named for each.