The New Trump Accounts: Could Your Child Benefit
The New Trump Accounts: Could Your Child Benefit from Having One?
If you’ve heard that the Department of Treasury is contributing $1,000 to the retirement savings of newborns, you’re not imagining it.
The One Big Beautiful Bill Act (OBBBA), signed by President Trump in the summer of 2025, created a new savings account for children. Formally known as a 530A account, it’s often referred to as a Trump Account.
It’s a tax-advantaged Individual Retirement Account (IRA) that’s designed specifically for children under age 18. This new account type is set to launch on July 4, 2026, with a special perk: U.S. citizens born between January 1, 2025, and December 31, 2028, are eligible to receive a $1,000 seed contribution from the Department of Treasury.
When you fill out your taxes, you can open an account for your qualifying children by using IRS Form 4547. You can also open an account online once the account portal for Trump Accounts is set up.
While the seed money is particularly eye-opening, any child who has a social security number and is under age 18 in the year in which their account is opened qualifies for a Trump Account. Each child is allowed only one funded Trump account.
How Does the Trump Account Work?
This is a custodial IRA account, where a parent or guardian opens it on behalf of a child, who is the beneficiary.
Until the year the child turns 18, parents, friends and family can contribute a total of up to $5,000 annually to the account. These contributions are made on an after-tax basis, meaning they’re not tax deductible for the contributor. Because they are after-tax contributions, the contributions can be withdrawn tax-free at retirement, though the earning and growth on the contributions are taxed as income upon withdrawal.
At the age of 18, the child owns the account. At this point, it becomes a traditional IRA.
The Trump Account Has a Couple Wrinkles
The first wrinkle: While the details are not yet fully hashed out, participating employers of parents will be able to contribute a total of up to $2,500 in pretax dollars from the parent’s earnings to Trump Accounts. However, the $2,500 limit is for the total number of the parent’s children—if you have multiple children, each with their own account, your employer is limited to contributing $2,500 in pretax dollars collectively among them.
The total annual contribution limit for individuals and employers to a Trump account is $5,000. This means if your employer contributes the $2,500 maximum to an account, only an additional $2,500 can be contributed by individuals.
The second wrinkle: Trump Accounts allow governments, philanthropists and nonprofits to contribute funds to anyone’s accounts. These gifts do not count toward the annual $5,000 contribution limit. So, for example, if your county decided to contribute a certain amount to every resident child with a Trump account, they could. However, these contributions (like the $1,000 seed money) would be taxable upon withdrawal.
Or, in a real-life example, Michael and Susan Dell (Dell Computers) have pledged to donate $6.25 billion to the program, in the form of one-time $250 contributions to children under 10 with Trump Accounts in qualifying zip codes, who are too old to receive the Federal government’s seed contribution.
The Unique Opportunities of a Trump Account
The $1,000 federal contribution is the headliner, but there are several other ways that the Trump Account stands out:
Opportunities for additional gifts. This account type is new and steeped in uncertainty. However, as it is set up, the Federal government is encouraging local governments, companies and philanthropists to rally around the idea of contributing to Trump Accounts as a way to boost the next generation. If you already have a Trump Account, you would be more ready to capture these possibilities—if they become available and your child qualifies.
No earned income requirement. While parents have previously been able to open IRAs on behalf of their children, there remained an earned income requirement: the kids needed to earn money in order for contributions to be made. A Trump Account gives parents an opportunity to save in a tax-advantaged manner for their child’s retirement well before their children begin working.
Contributions don’t affect overall IRA contribution limits. Until the child turns 18, the contributions made to a Trump Account do not count against the child’s annual contribution limits for IRAs. So, for example, a teenager with a job, a Roth IRA and a Trump Account could contribute $7,500 to their Roth IRA (the annual IRA limit for 2026) while their parents could contribute an additional $5,000 to their Trump Account, giving the child greater tax-advantaged retirement savings.
The Constraints of a Trump Account
As you’re considering whether you want to open an account on behalf of your child, there are several aspects worth pondering.
Limited investment options. During the growth period, funds in a Trump account may be invested only in eligible investments. An eligible investment, generally, is a mutual fund or exchange traded fund (ETF) that tracks an index of primarily U.S. companies, such as the Standard and Poor’s 500 stock market index, does not use leverage, does not have annual fees and expenses of more than 0.1 percent of the balance of the investment in the fund.
Multiple tax treatments within the same account. Be sure to keep careful records. As noted above, some contributions are considered after-tax, while others could be made pretax. When your child withdraws funds many years later, they will want to have detailed documentation.
Funds are generally inaccessible in the short and medium term. During the growth period of the account—from the time the account is opened until your child turns 18, funds cannot be removed, except for qualified rollover contributions, qualified ABLE rollover contributions, distributions of excess contributions, and at the death of the account beneficiary.
At age 18, the account transitions to an Individual Retirement Account owned by your child. At that point, the funds could be accessed, but with the usual penalties for early withdrawals from an IRA—unless an exception applies such as distributions for qualified higher education expenses or first home purchase or distributions after 59½.
Gift Tax Implications: Another Thing to Know
The annual gift tax exclusion of $19,000 (for 2026) does not apply to contributions made to Trump accounts by individuals. Thus, any contribution made by individuals to a Trump account may be subject to a gift tax. As a result, this may require an individual to file a gift tax return the year any contribution is made. Please consult with your tax advisor on any gift tax implications.
Trump Accounts are New for Everyone
With the launch of any new opportunity, there is a great deal of uncertainty.
We don’t yet know many aspects of the program: Who will administer the accounts, for example, or what specific investment options will be available, or if the annual gift tax exclusion will apply. While many companies have pledged support on the Trump Account webpage, it’s unclear what impact they may ultimately have. There also remains a lack of clarity around some of the tax and withdrawal rules for a Trump Account.
Doubtless, as the accounts are opened and funded, much of this will become known—and we will see how Trump Accounts dovetail with other custodial savings options in actual practice. For now, as you consider whether it’s right for you and your children, know that there are unknowns that may take some time to get resolved. You can visit trumpaccounts.gov for the latest updates.
The Trump Account Adds Another Tool
Ultimately, Trump Accounts are another tool to help you save for your children’s future. Like 529 plans, Roth IRAs, Uniform Gifts to Minors Act (UGMA) accounts or Uniform Transfers to Minors Act (UTMA) accounts, they give you the opportunity to plan, invest and save.
As you consider whether you should open one, your Wealth Advisor would be happy to review your financial goals to see if a Trump Account fits. Please reach out directly to get started.
Withdrawals from a Trump Account (Section 530A) prior to age 59½ may result in a 10% IRS penalty tax, in addition to current income tax. Some Trump Account rules and regulations are still forthcoming from the U.S. Treasury and IRS. Clients should consult with a qualified tax advisor or financial professional before making any decisions.
