Key Takeaways
- Trump Accounts are new tax-advantaged custodial savings accounts for children under 18, created by the One Big Beautiful Bill Act signed in July 2025.
- Eligible children born between 2025 and 2028 can receive a one-time $1,000 government seed contribution.
- Annual contributions are capped at $5,000 from any combination of family members and employers, with funds invested in low-cost U.S. equity index funds.
- No withdrawals are permitted before age 18, at which point the account transitions to a traditional IRA subject to standard IRA rules.
- Accounts are expected to open beginning July 5, 2026 through trumpaccounts.gov or IRS Form 4547.
What Are Trump Accounts?
Trump Accounts are a new type of tax-advantaged savings and investment account designed specifically for children. Created under the One Big Beautiful Bill Act (OBBBA), which was signed into law in July 2025, these accounts function as custodial traditional IRAs established on behalf of a minor. The concept is straightforward: give American families a dedicated vehicle to start building long-term savings for their children, supplemented by a government seed contribution for qualifying newborns.
While the accounts carry the presidential name, their underlying structure is essentially a traditional IRA with special rules for minors. A parent or guardian opens and manages the account on behalf of the child, who is the beneficial owner of the assets. Unlike a standard traditional IRA, the child does not need earned income to receive contributions, and withdrawals are prohibited until the beneficiary turns 18.
The program is administered jointly by the U.S. Treasury Department and the IRS, with initial accounts to be held at the Treasury before becoming available for rollover to private financial institutions such as Fidelity, Schwab, and Vanguard.
Who Is Eligible?
Eligibility for a Trump Account is broad. Any child who has not yet turned 18 by the end of the calendar year in which the account election is made can have a Trump Account opened on their behalf. The child must have a valid Social Security number. Only one funded Trump Account is permitted per child.
Children who are U.S. citizens and were born between January 1, 2025 and December 31, 2028 are eligible for a one-time $1,000 pilot program contribution from the federal government. This seed money is deposited directly into the child's Trump Account and does not count toward the annual contribution limit. A parent or guardian must file a Trump Account election (IRS Form 4547) for the child to receive the seed contribution.
It is important to note that children who do not qualify for the government seed contribution — for example, those born before 2025 or after 2028, or non-citizen children — may still be eligible to open a Trump Account and receive contributions from family members and employers.
Contribution Rules and Limits
The total annual contribution limit for a Trump Account is $5,000 per child. This limit will be indexed for inflation beginning after 2027. Contributions can come from multiple sources, each with its own rules:
| Contribution Source | Annual Limit | Tax Treatment | Notes |
|---|---|---|---|
| Individual (family, friends) | Up to $5,000 combined | After-tax (not taxable on withdrawal) | No earned income requirement for child |
| Employer | Up to $2,500 | Pre-tax (taxable on withdrawal) | Counts toward $5,000 limit; can split among children |
| Employee salary reduction | Combined with employer ≤ $5,000 | Pre-tax (taxable on withdrawal) | Payroll deduction option |
| Government seed | $1,000 one-time | Taxable on withdrawal | Does not count toward $5,000 annual limit |
| Charitable / governmental | Varies | Taxable on withdrawal | From states, municipalities, 501(c)(3) charities; does not count toward annual limit |
The distinction between after-tax and pre-tax contributions is important. Individual contributions from family members are made with after-tax dollars, meaning those dollars will not be taxed again when eventually withdrawn. Employer contributions and salary reductions, however, are made pre-tax, and will be subject to income tax upon withdrawal — just like a traditional IRA distribution.
Investment Options
Trump Account investment options are intentionally narrow. All funds must be invested in mutual funds or exchange-traded funds (ETFs) that track the S&P 500 or another equity index composed of at least 90% U.S. companies. Additionally, funds must have an expense ratio of no more than 0.10% (10 basis points), and no leverage is permitted.
This design ensures that every Trump Account is invested in broadly diversified, low-cost U.S. equities — the asset class with the strongest historical long-term track record. Account trustees may offer multiple qualifying fund options with a designated default investment for those who do not make an active selection.
The restriction to low-cost U.S. equity index funds is a deliberate policy choice. By limiting options to diversified stock index funds with rock-bottom expenses, the program avoids the pitfalls of costly, underperforming investments that have plagued some state-administered savings programs. For an account with a time horizon of 18 or more years, broad U.S. equity exposure has historically provided strong long-term returns.
Growth Potential
With a long time horizon and consistent contributions, a Trump Account has the potential to accumulate meaningful wealth by the time a child reaches adulthood. The table below illustrates several scenarios based on different contribution levels, assuming a 7% average annual return (roughly in line with the long-term historical average for U.S. equities after inflation adjustment):
| Scenario | Seed | Annual Contributions | Years | Estimated Value at Age 18 |
|---|---|---|---|---|
| Seed only (no additional contributions) | $1,000 | $0 | 18 | $3,380 |
| Seed + $1,000/year | $1,000 | $1,000 | 18 | $37,380 |
| Seed + $2,500/year | $1,000 | $2,500 | 18 | $88,380 |
| Seed + $5,000/year (max) | $1,000 | $5,000 | 18 | $173,380 |
| No seed + $5,000/year (older child, 10 yrs) | $0 | $5,000 | 10 | $69,080 |
These projections are hypothetical and assume a constant 7% annual return, which is not guaranteed. Actual results will vary based on market performance. However, the illustrations demonstrate the power of combining even modest contributions with a long time horizon and broad equity market exposure.
Tax Treatment
Trump Accounts are often described as tax-advantaged, but the tax treatment is more nuanced than a simple "tax-free" label suggests. The rules depend on the source of the contributions:
- Earnings on all contributions grow tax-deferred inside the account. No taxes are owed on dividends or capital gains while the money remains invested.
- Individual (after-tax) contributions are not taxed again when withdrawn, since they were made with money that was already taxed.
- Pre-tax contributions (employer contributions, salary reductions, and the government seed) will be taxed as ordinary income when withdrawn, just like a traditional IRA distribution.
- Earnings on all contribution types are taxed as ordinary income upon withdrawal.
Withdrawals from a Trump Account that include pre-tax contributions or earnings may be subject to the "kiddie tax" rules. Under these rules, unearned income above certain thresholds for children under 19 (or full-time students under 24) can be taxed at the parent's marginal tax rate rather than the child's lower rate. This is an important consideration for families planning the timing and amount of withdrawals. Notably, the kiddie tax does not apply to qualified Roth IRA withdrawals or 529 plan distributions, which may make those vehicles more tax-efficient in some situations.
Withdrawal Rules
One of the defining features of Trump Accounts is that no withdrawals are permitted before the beneficiary turns 18. There are no hardship exceptions, no early withdrawal provisions for education or medical expenses — the money is locked up until adulthood. This is both a strength (it ensures the funds have time to grow) and a limitation (it provides no flexibility for families who may need access to the funds).
Once the beneficiary reaches age 18, the account can transition to a standard traditional IRA. At that point, standard IRA distribution rules apply:
- Withdrawals before age 59½ generally incur a 10% early withdrawal penalty plus ordinary income tax on taxable portions.
- Exceptions to the penalty include: qualified education expenses, first-time home purchase (up to $10,000), birth or adoption expenses (up to $5,000), qualifying medical expenses, disability, and terminal illness.
- Required Minimum Distributions (RMDs) will apply at the standard age.
A Trump Account may not automatically become a traditional IRA when the child turns 18. Families may need to take action — such as rolling the balance to a traditional IRA or another eligible retirement account at a financial institution of their choice. It is worth planning ahead for this transition to ensure continuity of investment management and to evaluate whether a Roth conversion might make sense at that point, when the young adult is likely in a low tax bracket.
How to Open a Trump Account
Trump Accounts are expected to become available beginning July 5, 2026. There are two ways to open an account:
- Online at trumpaccounts.gov: The Treasury Department's dedicated portal will allow parents and guardians to open an account electronically and elect the government seed contribution for eligible children.
- IRS Form 4547: The Trump Account Election form can be submitted when filing your 2025 federal tax return, or independently through the IRS. A draft version of Form 4547 is currently available on the IRS website.
Initially, accounts will be held at the U.S. Treasury. Once accounts are established, families will be able to roll over the balance to a Trump Account at a participating private financial institution such as Fidelity, Schwab, Vanguard, or others. This rollover option gives families more control over their investment selection (within the qualifying fund universe) and consolidates the account with their existing financial relationships.
Trump Accounts vs. Other Savings Vehicles
Trump Accounts join an existing landscape of tax-advantaged savings options for children and families. Understanding how they compare helps determine whether a Trump Account, another vehicle, or a combination of both is the right approach for your family:
| Feature | Trump Account | 529 Plan | Custodial Roth IRA | UTMA / UGMA |
|---|---|---|---|---|
| Purpose | Long-term savings (retirement) | Education expenses | Retirement savings | General savings |
| Earned income required? | No | No | Yes | No |
| Annual contribution limit | $5,000 | Varies by state (often $300K+ lifetime) | $7,000 (2025) | No limit (gift tax rules apply) |
| Government seed money | $1,000 (if eligible) | No | No | No |
| Tax on growth | Tax-deferred | Tax-free (qualified) | Tax-free (qualified) | Taxable (kiddie tax) |
| Tax on withdrawal | Ordinary income (on pre-tax & earnings) | Tax-free for education | Tax-free (qualified) | Already taxed |
| Withdrawal before 18 | Not permitted | Allowed (with penalty if not for education) | Contributions withdrawable anytime | Allowed |
| Investment options | U.S. equity index funds only | Plan-specific menu | Broad (stocks, bonds, funds) | Broad (stocks, bonds, funds) |
| Impact on financial aid | TBD (likely minimal as retirement asset) | Moderate (parent asset) | Minimal (retirement asset) | High (child asset) |
Important Considerations
Before opening a Trump Account, families should weigh several factors:
- Liquidity lock-up: The money cannot be accessed before age 18 under any circumstances. If your family might need these funds for education, medical expenses, or emergencies, a more flexible vehicle may be more appropriate.
- Tax treatment is not purely "tax-free": While growth is tax-deferred, withdrawals of earnings and pre-tax contributions will be taxed as ordinary income. A custodial Roth IRA (if the child has earned income) or a 529 plan (for education) may provide more favorable tax treatment depending on the intended use of the funds.
- Limited investment menu: The restriction to U.S. equity index funds means no bonds, international diversification, or alternative investments. For an 18-year time horizon this is likely appropriate, but it does concentrate risk in a single asset class.
- Transition planning at age 18: The account may not automatically convert to a standard IRA. Families should plan for the transition and consider whether a Roth conversion at age 18 — when the young adult likely has little or no other income — could be a powerful long-term strategy.
- Coordination with other accounts: Trump Accounts are not mutually exclusive. A family might fund a Trump Account for long-term retirement savings and a 529 for education expenses, creating a comprehensive savings strategy for their child.
Strategic Tips
Making the Most of a Trump Account
- Open early, contribute consistently: The earlier the account is funded, the more time compounding has to work. Even small monthly contributions add up significantly over 18 years.
- Claim the seed contribution: If your child was born between 2025 and 2028, make sure to file the election (Form 4547) to capture the free $1,000 government seed money.
- Consider employer contributions: If your employer offers Trump Account contributions as a benefit, take advantage of it — this is essentially free money for your child's future.
- Plan the age-18 transition: When your child turns 18 and likely has little income, consider converting some or all of the traditional IRA balance to a Roth IRA. Paying taxes at a low bracket now can mean decades of tax-free growth.
- Coordinate with 529s: Use a Trump Account for long-term retirement savings and a 529 for education. They serve different purposes and complement each other well.
Key Dates and Timeline
| Date | Event |
|---|---|
| July 2025 | One Big Beautiful Bill Act signed into law, creating Trump Accounts |
| Late 2025 | IRS releases Notice 2025-68 with operational guidance; draft Form 4547 published |
| Early 2026 | Form 4547 can be submitted with 2025 tax returns |
| July 5, 2026 | Accounts open; contributions and seed deposits can begin via trumpaccounts.gov |
| After 2027 | $5,000 annual contribution limit begins indexing for inflation |
The Bottom Line
Trump Accounts represent a new and potentially valuable tool in the family savings toolkit. The combination of a government seed contribution, tax-deferred growth in low-cost index funds, and an 18-year forced savings horizon creates a structure well-suited for building long-term wealth for the next generation.
However, they are not the right fit for every situation. The lack of pre-18 liquidity, the tax treatment on withdrawal, and the limited investment menu are real trade-offs that families should weigh carefully. For many families, the best approach will be to use a Trump Account alongside other savings vehicles — combining the long-term power of tax-deferred equity growth with the flexibility and tax advantages of 529 plans, Roth IRAs, and other accounts tailored to specific goals.
As with any financial decision, the details matter. Working with a financial advisor can help you determine how a Trump Account fits into your family's overall financial plan, navigate the tax implications, and build a coordinated savings strategy that positions your children for long-term success.
This article is for informational purposes only and does not constitute investment, tax, or legal advice. Trump Account rules and regulations are still being finalized by the IRS and Treasury Department. All information should be verified with official sources and discussed with a qualified financial advisor before implementation.
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