We are writing to share an important development in tax-advantaged savings: the Trump Account, a new savings vehicle for children that officially launches on July 4, 2026. Created by the One Big Beautiful Bill Act (also known as the Working Families Tax Cuts Act), Trump Accounts offer families a new federally-backed way to build long-term wealth for the next generation.
Below, we walk you through what these accounts are, how they work, who qualifies, and what you should consider before opening one.
What Is a Trump Account?
A Trump Account (TA) is a new type of individual retirement account (IRA) created specifically for children under the age of 18. Think of it as a tax-deferred investment account with special rules that apply during the child's growing-up years — what the law calls the “growth period” — which lasts until December 31 of the year before the child turns 18.
Unlike a traditional IRA, a child does NOT need earned income for contributions to be made. The account is managed by an authorized adult until the child turns 18, at which point control transfers fully to the child.
At a Glance: Key Facts
Launch Date | July 4, 2026 |
Who Can Open One | Parent, legal guardian, adult sibling, or grandparent |
Who Qualifies | U.S. citizens under age 18 with a Social Security number |
Annual Contribution Limit | Up to $5,000 per year (from family members and employers combined) |
Employer Contribution | Up to $2,500/year from an employer, counted within the $5,000 limit |
Government Seed Money | $1,000 one-time contribution for children born Jan. 1, 2025 – Dec. 31, 2028 |
Investment Options | Low-cost index funds only (e.g., S&P 500 ETFs); max fee of 0.10%/year |
Tax Treatment | Tax-deferred growth; distributions taxed as ordinary income at age 18+ |
Withdrawals Before Age 18 | Not permitted (except rollovers or death of beneficiary) |
After Age 18 | Account converts to a standard traditional IRA; normal IRA rules apply |
How to Open | IRS Form 4547 or online at the U.S. government portal (trumpaccounts.gov) |
Who Qualifies?
To be eligible, a child must be:
- A U.S. citizen with a valid Social Security number
- Under the age of 18 before the end of the calendar year in which the account is opened
- A resident of the taxpayer’s household for more than half the year (if born before 2025)
The $1,000 government seed contribution applies only to children born between January 1, 2025, and December 31, 2028. Children born before 2025 may still have a Trump Account opened for them, but they are not eligible for the federal seed deposit.
Who Can Contribute — and How Much?
During the growth period (before the child turns 18), contributions may come from several sources:
- Family members (parents, grandparents, other relatives): collectively up to $5,000 per year
- Employers: up to $2,500 per year, counted within the overall $5,000 cap
- Federal, state, and local governments and qualifying nonprofit organizations: no annual cap (contributions must be made on a nondiscriminatory basis to a class of beneficiaries)
- The federal government: one-time $1,000 pilot program deposit for eligible newborns (not counted toward the $5,000 annual limit)
Note: Individual contributions to a Trump Account (from parents, grandparents, etc.) are nondeductible for income tax purposes. Additionally, unlike 529 contributions, these may NOT qualify for the annual gift tax exclusion ($19,000 in 2026). Absent further IRS guidance, donors may need to use a portion of their lifetime gift/GST tax exemption and file an annual gift tax return. We recommend consulting with us and your tax advisor before making large contributions.
How Are the Funds Invested?
During the growth period, Trump Accounts may only be invested in “eligible investments,” which are defined as:
- U.S. mutual funds or ETFs that track a qualified index (such as the S&P 500)
- Funds that do NOT use leverage
- Funds with annual fees of no more than 0.10% of the account balance
Industry-specific or sector indexes (e.g., technology, healthcare, ESG) are not permitted during the growth period. Money market funds and cash holdings are also excluded, except for very brief transitional periods. Once the child turns 18, the account converts to a standard traditional IRA and can be invested more broadly.
Tax Considerations
Trump Accounts grow tax-deferred, similar to a traditional IRA. When distributions are eventually taken (by the child at age 18 or older), they are taxed as ordinary income, reduced by any nondeductible contributions. Early withdrawals before age 59½ are subject to a 10% penalty, with limited exceptions — such as qualified higher education expenses or a first-time home purchase.
It is important to note that at age 18, the child gains full, unilateral control of the account. Parents have no ability to restrict access once that transfer of control occurs.
How Does It Compare to a 529 or Custodial Account?
Feature | Trump Account | 529 Plan | Custodial Account (UGMA/UTMA) |
Tax-deferred growth | Yes | Yes (tax-free if used for education) | No (gains taxed annually) |
Earned income required | No | No | No |
Use of funds restricted? | Yes — index funds only until age 18 | Yes — must be used for education | No — any purpose once child is of age |
Government seed money available | Yes — $1,000 for qualifying newborns | No | No |
Parental control after age 18? | No | Partial — owner can change beneficiary | No |
Things to Consider Before Opening a Trump Account
Trump Accounts offer some genuine benefits, but they also come with meaningful limitations. Here is a balanced view:
Potential Benefits:
- Tax-deferred growth over a potentially long time horizon — up to 18 years of compounding
- Free $1,000 federal seed money for qualifying newborns (born 2025–2028)
- No earned income requirement, so any child can participate
- Employer contributions available as an employee benefit (up to $2,500/year)
- Simple investment structure using low-cost, broad market index funds
Limitations and Cautions:
- At age 18, the child gains full, unrestricted control of the account
- Withdrawals are taxed as ordinary income — not capital gains — potentially at higher rates
- Contributions are nondeductible; gift tax implications may apply (no annual exclusion currently)
- Investment options are restricted during the growth period — no sector funds, ESG, or alternatives
- A 529 plan may be more advantageous if higher education funding is the primary goal, because distributions for qualified education expenses are tax-free
- A custodial account may offer more flexibility if the family prefers fewer restrictions on use
How to Open a Trump Account
You can open a Trump Account in one of two ways:
- Through your 2025 federal tax return by completing IRS Form 4547, which many major tax preparation services (H&R Block, TurboTax, etc.) are incorporating into their filing process
- Through the official government portal at TrumpAccounts.gov, which is expected to be available over the summer of 2026
The U.S. Treasury has also released an official Trump Account mobile app to help families track balances and investment performance.
Our Take
Trump Accounts are an interesting addition to the family wealth-building toolkit, particularly for families with young children or grandchildren who were born after January 1, 2025. The free $1,000 federal seed money alone makes it worth opening for eligible newborns — there is essentially no downside to capturing that free start.
For older children or larger gift strategies, we encourage you to weigh this vehicle carefully alongside 529 plans, custodial accounts, and other gifting strategies before committing significant funds. The gift tax treatment and loss of parental control at age 18 are real considerations that vary depending on your family’s situation.
As always, we are here to help you think through what makes the most sense for your family’s financial plan. If you have a child or grandchild who may be eligible, or if you simply want to talk through how this fits into your broader wealth strategy, please do not hesitate to reach out.