How Trump Accounts for kids will work

Parents looking to give their child a financial head start may be contemplating their child’s first investment account. Now, there’s a new type of account to consider.  

A new provision in the federal tax code will soon create a new type of investment account for eligible minor children, commonly called Trump Accounts, to help that child start saving for retirement. The IRS recently issued guidance addressing how these accounts will work. Here are a few key highlights to help you understand what to expect when these accounts launch in mid-2026.

A Trump Account, also known as a “Section 530A” account created by the One Big Beautiful Bill Act, is a tax-advantaged savings account for eligible minor children. Trump Accounts will allow contributions of up to $5,000 (subject to inflation) per year per eligible child, with an additional, one-time government pilot program seed contribution of $1,000 for eligible children who are U.S. citizens born in 2025 through 2028. The goal of a Trump Account is to help eligible minor children get an early start on long-term investing while encouraging them to keep their money invested for decades.

To be eligible, (i) an election with the Treasury must be made by an authorized individual to open a Trump Account for the child, (ii) the child must be under the age of 18 at the end of the year the election is made, and (iii) the child must have a valid Social Security number issued before the date of the election. Authorized individuals may elect to open a Trump Account for an eligible child by completing a new IRS Form 4547 (including when filing their 2025 income taxes) or electronically through www.trumpaccounts.gov.  These accounts will be established at a financial institution (or institutions) selected by the Treasury to be the “primary trustee”.

Government Seed Contribution (Pilot Program):

• A one-time $1,000 federal seed contribution will be available for any eligible child who is a U.S. citizen and born on or after January 1, 2025, through December 31, 2028, and for whom a specific election is made to receive such a pilot program contribution.  This one-time seed contribution will not be automatically deposited into a Trump Account without such an election – an authorized individual must elect to have the federal seed contribution made by completing Part III of the IRS Form 4547 or electronically through www.trumpaccounts.gov. 
• This one-time $1,000 federal contribution will not count towards the account’s $5,000 annual contribution limit.

Individual Contributions

• Individuals (parents, relatives, or other third parties) may make contributions of up to $5,000 per eligible child per year (subject to inflation adjustments), until the first day of the calendar year the beneficiary reaches age 18. Note that the first contribution to a Trump Account cannot be made until after July 4, 2026.
• Individual contributions will generally be made with after-tax dollars, therefore there will be no tax deductions for contributions (but tax-free withdrawal of such contributions).  However, certain other types of contributions – such as those made by an employer, a charity or the government – may be made with pre-tax dollars (so excluded from employee/beneficiary income when contributed, but taxable upon withdrawal of such contributions).  All investments grow tax-deferred, so no tax is due on earnings until funds are withdrawn post-age 18.

All contributions must be invested in eligible low-cost mutual funds or exchange-traded funds (ETFs) that track broad, majority U.S. company indices (e.g., S&P 500). The investment may not use leverage and must have an expense ratio of 0.1% (10 basis points) or less. Cash/cash-based positions are generally not allowed (e.g., no money market funds) – temporary cash is only permitted for the limited amount of time "reasonably necessary" to complete an eligible investment.

Tax Treatment of Contributions:

• Individual contributions will generally be made with after-tax dollars, therefore there will be no tax deductions for contributions (but not taxable upon withdrawal). 
• Employer or government contributions can be pre-tax for the beneficiary (but are taxed upon withdrawal).

Tax Treatment of Earnings:

• All investments grow tax-deferred, so no tax is due on earnings (interest, dividends, or gains) until funds are withdrawn post-age 18.

Generally, no withdrawals are allowed from a Trump Account prior to January 1 of the year in which the account owner attains age 18 (with certain limited exceptions, including death of the account beneficiary, transfers of all assets to an ABLE account for the same beneficiary in the calendar year the beneficiary attains age 17, or transfers of all assets to another Trump Account for the same beneficiary). After that, any distributions would generally be subject to the rules that apply to Traditional IRAs, including the 10% additional penalty tax on early distributions if an exception does not apply.

Generally, upon January 1 of the calendar year in which the eligible child turns 18, the specific rules applicable to Trump Accounts generally no longer apply.  Instead, at that point, the account is generally treated like a Traditional IRA and becomes generally subject to Traditional IRA rules.  However, note that the Trump Account still technically remains a Trump Account unless/until transferred into a Traditional IRA.  To transition the account to a Traditional IRA, the child beneficiary would need to transfer 100% of the Trump Account’s assets to a Traditional IRA in the child beneficiary’s name, after which it would be considered a Traditional IRA (and no longer a Trump Account), and the standard Traditional IRA contributions, distributions, and tax rules would generally govern the account.

Enrollment for Trump Accounts has begun – although the first contribution into the account cannot be made until after July 4, 2026.

Individuals can elect to open a Trump Account either by completing and submitting a new IRS Form 4547, with their 2025 taxes or mailed on its own, or completing an online tool at trumpaccounts.gov. 

The Treasury has indicated clients will be able to rollover or transfer their Trump accounts after they are opened.  However, the ability to do so is not expected to be available until a yet to-be-announced date after the July 4, 2026 launch.  Further details will be provided once additional guidance is received from the Treasury.

Whether a Trump Account makes sense for a particular family/child depends on that family’s goals, time horizon, savings strategies, and need for flexibility. The accounts can provide an additional way to start investing early on behalf of the eligible child, while encouraging the money to remain invested for decades. In addition, some families may further qualify for the one-time $1,000 federal seed contribution, providing an early investment boost specifically for U.S. citizen children born between January 1, 2025, and December 31, 2028.

On the other hand, the assets generally cannot be withdrawn without penalty before the calendar year the child turns 18 (with certain limited exceptions), which restricts access to savings (e.g., in case of an emergency). Additionally, there is limited investment flexibility prior to that calendar year of turning age 18, meaning that Trump Accounts would not generally offer as wide a range of investment options as compared to a typical brokerage account or IRA, for instance.  Additionally, individual contributions would generally be made with after-tax dollars and would not be tax deductible.

Lastly, many unknowns still remain regarding Trump Accounts, as they are new and guidance is still forthcoming.

As a result, Trump Accounts are not a one-size-fits-all solution.  As Trump Accounts launch in 2026, clients should understand how the accounts work (and their advantages and disadvantages), so to help decide whether they fit into a broader saving and investing strategy for a child.  Clients should also consult their own tax and/or legal advisor, who can help assess the suitability of Trump Accounts based on the client’s particular facts and circumstances.

CRC# 5331628 (05/2026)