Trump Accounts are a new type of tax-advantaged savings account for children, created under the One Big Beautiful Bill Act (2025). They function like custodial traditional IRAs, funded with after-tax dollars, with tax-deferred growth on investments.
Eligibility
- The child must be under age 18 at the end of the calendar year the account is established and have a valid Social Security number.
- Accounts are for U.S. children; the one-time $1,000 government seed contribution (pilot program) is available only to U.S. citizens born between January 1, 2025, and December 31, 2028.
How to Open and Claim the Seed Contribution Parents, guardians, or authorized individuals elect to establish the account using IRS Form 4547 (Trump Account Election). This can be filed with a tax return, separately, or electronically (via trumpaccounts.gov, starting mid-2026). The form requires the child’s name, SSN, address, and other details. The $1,000 seed is deposited by the U.S. Treasury once elected (for eligible newborns) and invested automatically.
Contributions and Investments
- Annual limit: Up to $5,000 total per year (indexed for inflation after 2027), from individuals or others.
- Up to $2,500 of this may come from employer contributions (potentially excludable from the parent’s taxable income).
- No earned income required for contributions (unlike traditional IRAs for minors).
- Funds must be invested in low-cost mutual funds or ETFs tracking major U.S. stock indexes (e.g., S&P 500).
Withdrawals and Uses
- No withdrawals allowed before age 18 (generally).
- After age 18, funds can be used for qualified expenses such as higher education, first-time home purchase, birth/adoption, disability-related costs, disaster recovery, terminal illness, or retirement.
- Distributions are taxed as ordinary income. Non-qualified withdrawals before age 59½ incur income tax plus a 10% penalty.
- After age 59½, penalty-free withdrawals for any purpose (taxed as ordinary income).
Advantages and Limitations
- Pros: Government seed money for eligible newborns, no earned income requirement, tax-deferred growth, flexible qualified uses beyond just education or retirement.
- Cons: Contributions are after-tax (not deductible), growth is tax-deferred (not tax-free like Roth IRAs or 529 plans for qualified education), and accounts mix after-tax personal contributions with potentially tax-advantaged employer ones.
- Compared to 529 plans: Trump Accounts offer broader qualified uses but only tax-deferred growth (no federal/state tax-free withdrawals for education).
- Compared to traditional IRAs: No earned income needed; restricted investments and early withdrawal rules apply during childhood.
Trump Accounts aim to promote long-term savings and generational wealth-building with a government incentive for newborns. Families should compare them to other options such as 529 plans and Roth IRA’s based on their goals, tax situation, and time horizon.
About the Author
James Millington, CFP® is a Certified Financial Planner® and financial advisor at Landmark Wealth Management, LLC, a fee-only SEC registered investment advisory firm. He specializes in helping individuals and families develop comprehensive financial strategies to achieve their long-term goals.