Families in 2026 will have a new option to save and invest for a child’s future: the Trump Account. Created under the One Big Beautiful Bill Act, this account is designed to give children an early start on long‑term investing using a structure similar to a traditional IRA, but without requiring earned income.
While much of the attention has focused on the $1,000 government seed contribution, the real value (and complexity) lies in understanding how these accounts work, what the tax rules look like, and how they fit alongside existing planning tools like 529 plans.
Below is a practical overview of what parents and caregivers should know.
What Is a Trump Account?
A Trump Account is a tax‑advantaged, IRA‑style account created specifically for children under age 18. Each eligible child may have only one account, and the account is legally owned by the child, with an adult acting on the child’s behalf until adulthood.
The intent is to encourage long‑term saving and investing, not short‑term spending.
Trump Account Eligibility Rules
A Trump Account may be opened for a child who:
- Is under age 18 at the end of the year the account is established
- Has a Social Security number
To qualify for the $1,000 pilot program contribution, the child must also:
- Be a U.S. citizen
- Be born between January 1, 2025 and December 31, 2028
Only one funded Trump Account is permitted per child.
Philanthropic Contributions: In addition to government funding, private contributions may also apply. Michael and Susan Dell have announced a philanthropic pledge to contribute $250 to Trump Accounts for children under age 10 who were born before 2025 and live in areas with a median household income of $150,000 or less.
When Trump Accounts Can Be Opened and Funded
Parents and guardians may elect to open an account beginning in 2025 by filing IRS Form 4547, but no contributions can be made until after July 4, 2026.
Filing Form 4547 with a 2025 tax return allows the account to be established and ready when funding opens. Form 4547 also serves as the election to receive the $1,000 government contribution, if the child qualifies.
Trump Account Contribution Rules
One of the most unique features of Trump Accounts is the broad range of permitted contributors.
Eligible contributors include:
- Parents and grandparents
- Other individuals
- Employers
- Government entities
- Charitable organizations
Contributions from individuals and employers are combined and generally limited to $5,000 per year per child. Certain government or charitable contributions may be made outside of this annual limit.
Unlike traditional IRAs:
- Earned income is not required
- Contributions are not tax-deductible (and therefore not taxable upon withdrawal if detailed records are kept)
- Funding a Trump Account does not impact eligibility to contribute to other IRA accounts
Withdrawals, Taxes, and IRS Penalties
Trump Accounts have strict withdrawal rules and important tax considerations.
Before age 18, withdrawals are generally prohibited, with limited exceptions for rollovers or corrections of excess contributions.
Beginning January 1 of the year the child turns 18, the account follows traditional IRA rules:
- Earnings are taxed as ordinary income when withdrawn
- Withdrawals before age 59½ may be subject to a 10 percent IRS early withdrawal penalty
Penalty exceptions may apply for:
- Qualified higher education expenses
- Disability
- Up to $10,000 for a first-time home purchase
Even when the penalty is waived, income taxes on earnings still apply. This is an important difference between Trump Accounts and education-focused savings vehicles such as 529 plans.
Roth Conversion Opportunities for Trump Accounts
A key planning opportunity arises once the child reaches age 18. At that point, the Trump Account may be converted to a Roth IRA.
This strategy can be especially powerful if the child has little or no income and falls into a low tax bracket. Paying modest taxes early may allow the account to convert to Roth status, after which future growth and qualified withdrawals could be tax free for life.
This Roth conversion strategy is often viewed as the primary long-term benefit of Trump Accounts, particularly when balances include government or employer contributions that would otherwise be taxable at withdrawal. As with any Roth conversion, careful analysis is essential.
How Trump Accounts Fit Into a Broader Plan
Trump Accounts are not a replacement for other savings vehicles.
For many families:
- 529 plans may still be better suited for education funding
- Custodial accounts may offer greater flexibility
- Roth IRAs for working teens may be more tax‑efficient
Trump Accounts may make the most sense when:
- A child qualifies for the $1,000 pilot contribution
- Employer or charitable contributions are available
- The family is planning with a long‑term, Roth‑conversion mindset
Bottom Line
Trump Accounts offer a new way to give children an early start on investing, but they come with retirement‑style tax rules and potential penalties that differ significantly from traditional college savings plans. It’s important to review with your financial advisor how these new opportunities fit within your overall financial plan.
