Tucked inside the One Big Beautiful Bill Act that President Trump signed into law on July 4, 2025, is a provision most Vermont parents and grandparents have never heard of — and it comes with a free $1,000 from the federal government for newborns.

The accounts are officially Section 530A accounts under the Internal Revenue Code, though the legislation itself calls them Trump Accounts. They function as a specialized traditional IRA for minors, and for any U.S. citizen child born between January 1, 2025, and December 31, 2028, the federal government deposits a one-time $1,000 contribution into the account. No matching funds required. No income limits. No strings attached beyond filing IRS Form 4547 and having a Social Security number for the child.

Contributions to the accounts begin July 4, 2026. The IRS is building out the online portal at trumpaccounts.gov, with a full website expected by mid-2026. For children born in 2025, Form 4547 can be filed with the 2025 tax return or submitted separately.

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How the money grows

The $1,000 seed money gets invested in a low-cost mutual fund or ETF that tracks a broad U.S. stock index — the S&P 500 is the obvious example. The fund’s expense ratio cannot exceed 0.10 percent, and the account can’t be withdrawn from until January 1 of the year the child turns 18.

Left entirely alone at historical S&P 500 returns, the $1,000 seed grows to roughly $3,400 in real inflation-adjusted terms by age 18, or closer to $5,500 in nominal dollars. That’s for parents who do absolutely nothing but file the form.

Parents, grandparents, relatives, and even employers can contribute up to a combined $5,000 per year per child. The math compounds quickly from there. Adding $50 a month — $600 a year, about the cost of a tank of gas every two months — gets the account to roughly $32,000 by age 18 at historical stock market returns. Contributing $100 a month brings it to about $60,000. Maxing the $5,000 annual cap every year for 18 years puts the account north of a quarter million before the kid can legally buy a beer.

What happens at 18

On January 1 of the year the beneficiary turns 18, the Trump Account automatically converts to a standard traditional IRA. The investment restrictions drop away, the child takes legal control, and the account follows normal IRA rules from that point forward.

That’s where the strategic value kicks in. The young adult can leave it invested for retirement, take withdrawals subject to ordinary income tax and a 10 percent early withdrawal penalty, or execute a Roth IRA conversion that pays the tax once at a low early-career rate and locks in tax-free growth for the rest of their life. Financial planners generally recommend waiting until age 24 to do the Roth conversion to avoid the “Kiddie Tax,” which can pull the conversion income into the parents’ tax bracket.

For a Vermont kid who skips a four-year college and goes into trades, welding, plumbing, electrical work, or self-employment, the account can be particularly valuable. Those career paths don’t typically come with an employer 401(k) match, and the Trump Account essentially creates an 18-year head start on retirement savings the kid never had to fund themselves.

Vermont’s end is unresolved

The state tax treatment is less settled. Vermont is a static-conformity state, meaning the Vermont tax code is pinned to a specific version of the federal Internal Revenue Code — currently December 31, 2024, under Act 27 of 2025, which predates the One Big Beautiful Bill Act. The conformity provision was tucked into Section E.111 of H.493, Vermont’s annual omnibus appropriations bill, rather than a standalone tax measure.

That means the new Section 530A doesn’t exist in Vermont’s tax code unless and until the Legislature updates the conformity date. The House Ways and Means Committee has been working H.933, a conformity bill that passed the House in March and moved to the Senate, but that bill focuses almost exclusively on corporate provisions — research and development expensing, bonus depreciation, and international tax rules. Trump Accounts have not come up in committee testimony or in the National Conference of State Legislatures briefing the committee received on February 5.

The practical effect for parents is minimal. The $1,000 federal contribution isn’t subject to Vermont state tax because it’s a federal program outside Vermont’s jurisdiction. Whether investment growth inside the account during the minor years is taxable at the Vermont level remains an open question, though by default, traditional IRA treatment under pre-OBBBA law would leave the growth tax-deferred. The Vermont Department of Taxes has not issued guidance.

For Vermont families expecting a child, or with one born since January 2025, the federal side is straightforward: file the form, claim the $1,000, and let compound interest do the rest.

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Dave Soulia | FYIVT

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