OBBBA: 529 Plans & the New "Trump Accounts" for Kids
OBBBA isn’t just about deductions and tax brackets — it also introduced two big planning tools for families who want to support education and long-term savings for children and grandchildren.
529 Plans: Starting in 2025, 529 Plans Can Now Pay for:
• K-12 Curriculum and materials (not just tuition)
• Tutoring (even outside the home)
• Standardized tests and dual enrollment programs
• Educational therapy costs for students with disabilities
• Earning post secondary credentials and the continuing education to maintain them --including trade licenses and certifications
📌 Effective Starting in 2026: The annual cap on qualified K–12 expenses increases to $20,000
💡 Planning Tip: If you have extra 529 funds after college, these expanded uses could help put that money to good use — especially if a child pivots to trade, certification, or licensing paths.
Trump Accounts: A Retirement Starter for Kids
This new type of IRA allows savings in a tax-deferred account even before a child has earned income and doesn’t limit the funds’ use to education. It does come with a lot of rules — including rules that are yet to be written. So far, we know the following about these accounts:
• Can be opened for any child with a Social Security number
• Up to $5,000/year can be contributed, starting in 2026
• Employers of the parents can contribute $2,500 annually in addition to the above mentioned limit
• Other entities (Federal, state, and local governments and 501c(3) charitable organizations) may also contribute to them
• Must be invested in low-cost, index-tracking U.S. equity funds until age 18
• No withdrawals until age 18 (except rollovers to an ABLE account at age 17 assuming the beneficiary qualifies due to disability)
• At age 18, the account becomes a standard IRA and investments are no longer restricted to US equity index funds
⚠️ Whether or not other rules that typically apply to IRA’s (required minimum distributions, Roth conversions, inherited IRA distribution time frames) is yet to be determined.
Bonus Opportunity:
Children born in 2025, 2026, or 2027 may be eligible for a $1,000 federal contribution through a pilot program. Details regarding how the accounts will be opened and the contribution claimed are still pending.
🎯 Strategic Tip: These accounts could be a valuable way to plant the seeds of tax-deferred compounding — and may open the door for future Roth conversion strategies once the child turns 18.
Next (and final) post: We’ll wrap the series with a grab bag of lesser-known provisions — from clean energy credits and business depreciation to Qualified Opportunity Zones and reporting rule changes.
