Beginning July 4, 2026, families will have access to a new type of tax-advantaged investment account for children known as a “Trump Account.” Created under the Working Families Tax Cuts legislation, these accounts are designed to encourage long-term investing, financial literacy, and asset building for the next generation.
The accounts have generated significant attention because eligible children born between 2025 and 2028 may receive a one-time $1,000 government contribution to help jumpstart savings. While the accounts share some similarities with IRAs and 529 college savings plans, they also have several unique rules and restrictions that families should understand before opening one.
What Is a Trump Account?
A Trump Account is a custodial investment account established for children under age 18 who have a valid Social Security number. The account is intended to provide children with long-term investment exposure early in life, allowing contributions and investment growth over many years before adulthood.
Parents or guardians act as custodians and manage the account until the child reaches age 18. Once the child becomes an adult, ownership and control transfer directly to them.
The accounts officially begin accepting contributions on July 4, 2026.
Who Is Eligible?
Any child under age 18 with a valid Social Security number may be eligible for a Trump Account. Parents, guardians, or other authorized individuals can open and manage the account on behalf of the child. There is a hierarchy in who can open the account on behalf of a minor. If you are a grandparent, do not open the account for your grandchild unless you are the acting guardian for that child. It is required that parents be the custodian over the account before grandparents. Grandparents can contribute to the account on behalf of the parent or grandchild but they cannot supplant the parent as custodian.
In addition, children who meet the following criteria may qualify for a special government-funded contribution:
· Born between January 1, 2025 and December 31, 2028
· U.S. citizen
· Valid Social Security number
· Proper election filed with the IRS
How Much Can Be Contributed?
For 2026 and 2027, annual contributions are capped at $5,000 per child. Beginning in 2028, the limit is expected to be indexed for inflation.
The contribution limit applies to combined contributions from individuals and employers. However, certain government and charitable contributions do not count toward the annual limit.
Who Can Contribute?
Contributions can come from a wide variety of sources, including:
· Parents and grandparents
· Other family members and friends
· Employers
· Charitable organizations
· State or local governments
· Philanthropic organizations
Employer contributions are generally limited to $2,500 annually and count toward the overall $5,000 annual cap.
One unique feature of the program is that contributions are not dependent on earned income, unlike Traditional IRAs or Roth IRAs for minors.
How Are the Funds Invested?
Before the child turns 18, investment options are intentionally limited to low-cost, diversified index investments such as mutual funds or ETFs tracking broad U.S. stock indexes.
The legislation generally requires investments to meet criteria such as:
· Primarily invested in U.S. companies
· Broad market diversification
· No leverage
· Low expense ratios
Many early implementations are expected to default to S&P 500 index-style investments.
The purpose behind these restrictions is to encourage long-term, low-cost investing rather than speculative trading.
What Can the Money Be Used For?
Trump Accounts are intended to support long-term wealth building and future opportunity. Once the child reaches adulthood, funds may generally be used for:
· Higher education expenses
· First-time home purchases
· Starting or funding a business
· General long-term savings or retirement planning
Unlike 529 plans, the accounts are not exclusively tied to education expenses. This flexibility is one of the program’s major selling points.
Withdrawal Rules and Restrictions
One of the most important limitations is that withdrawals are generally prohibited before age 18.
Limited exceptions may apply in situations such as:
· Death of the beneficiary
· Correcting excess contributions
· Certain rollovers
· Transfers to ABLE accounts in limited circumstances
After age 18, the account begins functioning more similarly to a traditional IRA structure.
How Are Trump Accounts Taxed?
Contributions made before the child turns 18 are not deductible for federal income tax purposes. The accounts grow tax-deferred, meaning investments can compound without annual taxation on dividends, interest, or capital gains while the money remains in the account. When funds are eventually withdrawn, distributions are generally taxed as ordinary income. Depending on how funds are used, penalties or preferential treatment may apply under future regulations. Because contributions were not tax deductible, at withdrawal these funds will be returned tax free. Only earnings on those contributions will be subject to income tax.
How Do Trump Accounts Compare to 529 Plans?
While both are designed to help children build wealth, there are several important differences:
Feature | Trump Account | 529 Plan |
Primary Purpose | Long-term investing and wealth building | Education savings |
Tax Treatment | Tax-deferred growth | Tax-free qualified education withdrawals |
Contribution Limit | $5,000 annually | Much higher state-based limits |
Investment Restrictions | Broad index investments only before age 18 | Wide investment menus |
Flexibility | Education, housing, business, retirement | Primarily education |
Government Seed Deposit | Possible $1,000 contribution | No federal seed contribution |
For many families, Trump Accounts may complement rather than replace existing college savings strategies.
How Do I Open an Account?
If you are interested in opening an account, there are two ways to do so. You can elect to have the account open when you filed your 2025 income tax return. If you are currently on extension and haven’t yet filed please ask your CPA about making this election for you. If you’ve already filed your taxes you can go to trumpaccounts.gov and fill out IRS Form 4547 there to open the account.
Final Thoughts
The new Trump Accounts represent a significant new savings vehicle aimed at helping children begin investing earlier in life. Supporters believe the accounts could improve financial literacy and encourage long-term investing habits by giving children a financial foundation from birth.
For families with young children, the combination of a potential $1,000 government contribution, tax-deferred growth, and decades of compounding could make these accounts a valuable long-term planning tool.
However, parents should also understand the tradeoffs — including contribution limits, withdrawal restrictions, and the fact that distributions may ultimately be taxable.
As additional Treasury and IRS guidance continues to emerge ahead of the July 4, 2026 rollout, families should review how these accounts fit within their broader financial and estate planning strategy.
*Trump Accounts offer tax deferred growth on earnings. Family contributions are made with after tax dollars, and eligible employer contributions may be excluded from the employee’s taxable income. Distributions are generally prohibited during the child's growth period and, once permitted, are taxable as ordinary income and may be subject to a 10% IRS early distribution penalty if taken before age 59½. Contribution limits and other restrictions apply, and some rules remain subject to future Treasury and IRS guidance. Consult a qualified tax advisor or financial professional before making decisions.
Trump Accounts Contribution Pilot Program (via the Federal Register)