One of the provisions introduced in the Big Beautiful Bill is the Trump Account. We’ve received several questions about what this is and how individuals can participate. As is often the case with new benefits, it takes time for the IRS or other agencies to establish implementation guidelines. Here’s what we know so far.

What is a Trump Account

Trump Accounts are long-term, tax-advantaged savings accounts created specifically for children under 18 years old. They are legally structured as IRA-style accounts and generally follow federal rules for traditional (non-Roth) IRAs once the child reaches adulthood.

The policy goal is to:

• give every eligible child a head start on retirement savings, and
• encourage contributions from parents, grandparents, and even employers over the years.

Who Is Eligible and When Do These Accounts Start?

Eligibility

A Trump Account can be opened for a child who:

• is under age 18 at the end of the calendar year, and
• has a valid Social Security number.

Parents or legal guardians will open and manage the account on the child’s behalf while the child is a minor.

Start Date

The law authorizes the Trump Account beginning in 2026. Contributions are expected to start on July 4, 2026, with nationwide availability anticipated by January 1, 2026 (or shortly thereafter), subject to Treasury implementation.

The U.S. Department of the Treasury will oversee the program and either hold the accounts directly or approve private institutions—such as banks, brokers, and recordkeepers—to offer them.

The $1,000 Government “Seed” Contribution

One of the most talked-about features of the program is the one-time $1,000 federal deposit for eligible newborns.

• Who qualifies? Children born between 2025 and 2028 who are U.S. citizens and have a Social Security number.
• How does it work? The $1,000 will be deposited into a Trump Savings Account as part of a federal pilot program.
• Does it affect contribution limits? No. This government deposit does not count toward the annual $5,000 contribution limit (details on that below).

The Treasury and IRS are still finalizing how the funds will be distributed—whether accounts will be created automatically or parents will need to claim the benefit. Current guidance suggests that when parents file taxes and claim their child as a new dependent, the Treasury will “seed” the account in July of that same year. More will come about this process.

How Contributions Work (Before Age 18)

Annual Limits

While the child is under age 18, the contribution limits are as follows:

• Total annual contribution limit: Up to $5,000 per year per child from individuals and employers combined.
• The $1,000 government seed contribution is in addition to this limit.

Who Can Contribute?

Under the Act and current guidance, the following can contribute to a Trump Account:

1. Family and individuals
• The child, parents, grandparents, or other individuals can collectively contribute up to $5,000 per year.
• Contributions are made with after-tax dollars (no upfront tax deduction).
2. Employers
   • A parent’s employer (and, once the child is older, the child’s employer) can contribute to the child’s Trump Account.
   • Employers can contribute up to $2,500 of the total $5,000 without it counting as taxable income to the parents.
   • More details about how this will work are forthcoming.
3. Government Entities and Nonprofits
   • States, local governments, tribal governments, and charities can contribute to “qualified groups” of children (for example, every child in a school district or every baby born in a particular year).
   • These group contributions do not count toward the $5,000 family/employer limit, but all children in the group must receive the same amount.
4. Federal Pilot Program
   • As mentioned before, the federal government itself will make the one-time $1,000 deposit for children born 2025–2028 who meet the citizenship/SSN requirements.

Investment Rules While the Child Is Under 18

Before the year the child turns 18, investment options are intentionally simple and tightly regulated. The account can only hold mutual funds or ETFs that do the following:

• Track a broad U.S. equity index (such as the S&P 500 or another regulated, diversified U.S. equity index).
• Do not use leverage.
• Have an expense ratio capped at 0.10% (10 basis points).

This structure is designed to keep costs low, avoid complex or speculative strategies, and create a long-term “set it and forget it” growth vehicle.

No Withdrawals Before Age 18

• Distributions are not allowed until January 1 of the calendar year in which the child turns 18, except for very limited exceptions (such as correcting excess contributions or certain rollovers to another Trump Account or an ABLE account).

What Happens at Age 18 and Beyond?

Around age 18, a Trump Savings Account transitions into a traditional IRA for the child.

• Ownership and Control
• The now-adult child becomes the account owner and gains full control over investment and distribution decisions.
• Contribution Rules After 18
  • Standard traditional IRA rules apply, including:
  • Annual IRA contribution limits.
  • Earned income requirement for contributions.
• Investment Flexibility
  • The strict pre-18 investment restrictions disappear. The account can be invested like any standard IRA, subject to usual IRA rules and provider offerings.
• Withdrawal Rules
  • Distributions before age 59½ are generally subject to the following:
    • Ordinary income tax on the taxable portion
    • A 10% early-withdrawal penalty, unless an exception applies (e.g., first-time home purchase, qualified higher-education expenses, certain medical/disability situations, birth/adoption costs)

How Are Trump Accounts Taxed?

The tax treatment is similar to a traditional IRA, with a few important differences:

• Family Contributions (Parents/Individuals)
  • Contributions are made with after-tax dollars (no upfront deduction for contributions before age 18).
  • These contributions create a basis in the account. When funds are withdrawn later, the portion representing these after-tax contributions is not taxed again.
• Employer, Government, and Nonprofit Contributions — Plus Earnings
  • These amounts are tax-deferred: no tax is due while funds remain in the account.
  • When withdrawn, these components are generally taxed as ordinary income, pro-rated along with the nontaxable basis from family contributions.

Net Result: For many families, Trump Accounts function as a hybrid between a traditional IRA and a long-term, after-tax investment account—offering the added benefits of a federal seed contribution and potential employer participation.

How Trump Accounts Compare to Other Children’s Accounts

529 College Savings Plans

• Purpose: 529 plans are designed primarily for education expenses, while Trump Accounts focus on retirement and long-term wealth building.
• Tax Treatment:
  • 529 earnings can be withdrawn tax-free for qualified education expenses.
  • Trump Account withdrawals are generally taxed as ordinary income unless they qualify for standard IRA exceptions (e.g., first-time home purchase). Unlike 529s, Trump Accounts are not restricted to education.

Custodial UTMA/UGMA Accounts

• Liquidity: Custodial accounts become fully liquid at the age of majority, with no withdrawal penalties, and earnings are taxed annually.
• Trump Accounts: Locked until age 18, then subject to IRA rules and early withdrawal penalties—but they offer tax-deferred growth and stronger guardrails against premature spending.

Roth IRAs for Kids

• Eligibility: Roth IRAs require the child to have earned income, which many young children don’t have.
• Trump Accounts: Allow contributions without an earned income requirement, enabling people to start saving at birth.

Potential Advantages and Drawbacks of the Trump Account

Potential Advantages

• A $1,000 automatic head start for eligible newborns can be powerful when combined with decades of compounding interest.
• Families and employers can contribute in a structured, tax-deferred way, focused on the child’s long-term financial future.
• Low-cost equity index investing encourages discipline and reduces the temptation to trade or speculate.

Potential Drawbacks

• Funds are not accessible before age 18 and then remain subject to IRA rules—this is not an emergency fund or short-term savings vehicle.
• Contributions are not tax-deductible for parents while the child is a minor. Families focused on education may prefer 529 plans, and those with earned income may consider Roth IRAs.
• Several details remain uncertain, including the following:
  • Reporting mechanics.
  • Exact conversion procedures to IRAs at age 18.
  • Rules for special distributions.
  • Treasury and IRS guidance is still in progress.