Officially launching on July 4, 2026, the Section 530A Account is a government-funded, tax-advantaged investment account for kids that’s designed to help growing families save more for their children’s future—with some free money to get them going.
Every child born between January 1, 2025, and December 31, 2028, is eligible for a $1,000 contribution* to kick off their account.
These accounts will not be opened automatically. Parents and guardians will need to file IRS Form 4547 to open the account and claim the federal $1,000 seed credit.
It’s a lot like an IRA, just in your kid’s name. The funds that you (and others, more on that later) contribute to the account are invested, and the earnings grow tax-free.
You don’t have to worry about those contributions being spent early, either. Even though the account is in your kid’s name, funds can’t be withdrawn or spent at all until January 1 of the year that they turn 18.
The account will function like a traditional IRA, following the same set of rules. Most withdrawals before the age of 59 ½ are subject to any taxes owed, as well as a 10% penalty fee—with exceptions for things like educational expenses or buying a first home.
Unlike a traditional IRA, personal contributions to the account are made with after-tax dollars. Contribution limits are also slightly different, and investment options are more restricted.
Since your newborn probably isn’t going to work quite yet, there also aren’t any earned-income requirements, and more parties are able to pitch in.
As a variation of an IRA, it’s designed with many of the same long-term goals in mind—from building a financially stable retirement to taking advantage of penalty-free withdrawals to fund education, buy a first home, or start a business.
All U.S. citizens under 18 on December 31 of the year the account is opened who have a Social Security number are eligible for the account, and a parent or guardian can open and manage it on their behalf.
Those born between January 1, 2025, and December 31, 2028, will also receive the $1,000 contribution.
Overall contributions are capped at $ 5,000 per year (with some exceptions) and will be adjusted for inflation in 2028. We’re still waiting on full guidelines from the Treasury Department, so here’s what we know so far:
We also know that the federal government’s initial $1,000 contribution won’t count towards the yearly limit for those who qualify, and that contributing to a 530A Account won’t impact other IRA or 401(k) contribution limits.
Investments can only be made in diversified, low-cost mutual and exchange-traded funds that track a qualified major index—with some additional rules around how the fund has to operate.
That means all 530A Accounts are restricted to low-risk, long-term investments. That said, keep in mind this account is tied to the market. Even with safeguards in place, there will always be a risk of losing money.
Funds can’t be kept in cash, and there are no distributions or withdrawals until the year your child turns 18. For the most part, everything is invested—though you can hold multiple investments in the account.
The first step is to wait a bit. To open a 530A Account, you need to either file IRS Form 4547 with your taxes or use the online portal—neither of which is available yet. Once you’ve started the account, you’ll have to sit tight until July 4, 2026, before you’re able to make any contributions.
After you’ve done the paperwork, the Treasury Department will contact you to complete the opening process. The account will be held with the Treasury’s financial agent at first, but you’ll be able to transfer it to an IRS-approved institution of your choice at a future date. No details have been shared about that second phase.
A 529 plan is another type of tax-advantaged investment account designed specifically to support your child’s educational future—and Michiganders have a few types to choose from.
Just like a 530A, you can start one for your newborn and take advantage of tax-free growth on earnings that compound over time. Almost anyone can contribute to it, too, including grandparents, friends, and even your student themselves.
It can also be rolled into a retirement account when they’re older—though this must be a Roth IRA, and there are some restrictions and limits involved.
Unlike a 530A, the funds are specifically meant for educational expenses, and using money for non-qualified expenses comes with penalties and taxes. There are also limits on how much you can use at a time, and for what.
The beneficiary can have multiple accounts, with up to $500,000 total across all for Michiganders. Almost anyone can open an account, regardless of relation, and accounts can be transferred to other beneficiaries. Contributions are also deductible on your Michigan state taxes—$5,000 per year for individuals, and $10,000 for married couples.
Everyone’s financial situation is different, and the dreams you have for your family’s future are unique, too. While 530A Accounts come with a lot of perks (especially the free $1,000) there are other great tools available, and you should consider all options before making a commitment.
We exist to bring our members’ wild dreams to life—from finding the right path forward, to walking it with confidence. If all this information is getting a little too confusing, you can book a free appointment with one of our financial counselors in just a few clicks!
Disclaimer
This article is published on the orsa credit union blog for informational and educational purposes only.
The content of this article, including any references to financial strategies, accounts, or policies, represents the author's opinions. It does not constitute tax, investment, financial, legal, or any other form of professional advice. You should not rely on this information as a substitute for personalized advice from a qualified professional.
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*U.S. citizenship and Social Security number required.
