Trump Accounts: What Every Parent Needs to Know
How Trump Accounts work for kids under 18, who qualifies for the $1,000 deposit, tax rules, and how they compare to 529 plans and custodial accounts.
Trump Accounts: What Every Parent Needs to Know
If you have a child under 18, there is a new savings tool you should know about. Created under the One Big Beautiful Bill Act, Trump Accounts are tax-advantaged investment accounts designed to give kids a financial head start — and they are available to every U.S. child under 18 with a Social Security number.
Here is how they work, who qualifies, and whether they make sense for your family.
What Is a Trump Account?
Think of it as a hybrid between an IRA and a 529 plan. Money goes in after-tax, grows tax-deferred, and stays locked until your child turns 18. At that point, the account converts into a traditional IRA, and your child can use the funds for college, a first home, or long-term retirement savings.
Unlike a 529, there is no requirement that the money be used for education. And unlike a custodial brokerage account, the growth is not taxed year to year.
Who Qualifies?
Any U.S. citizen under the age of 18 with a valid Social Security number. There are no income limits or other restrictions for the parents or guardians opening the account.
However, there is an important distinction based on when your child was born:
Born between January 1, 2025 and December 31, 2028: Your child qualifies for a one-time $1,000 seed deposit from the federal government — no strings attached.
Born before 2025 (but still under 18): You can still open a Trump Account, but your child will not receive the $1,000 government deposit. You will be starting from zero and funding it yourself.
The Dell Foundation boost: Up to 25 million children age 10 or younger who were born before 2025 and live in ZIP codes where the median income is below $150,000 may receive a $250 charitable deposit from the Michael and Susan Dell Foundation.
How Much Can You Contribute?
The annual contribution limit is $5,000 per child. That limit includes contributions from all sources — parents, grandparents, family, friends — but does not count the government $1,000 deposit or charitable contributions.
Employers can also contribute up to $2,500 per year toward that $5,000 cap, and that amount generally is not treated as taxable compensation to the parent. Companies like Uber, Intel, Nvidia, and others have already pledged to participate.
Your child does not need earned income to receive contributions, which is a key difference from a traditional IRA.
How Is the Money Invested?
Trump Accounts are limited to approved investments — generally low-cost index funds or ETFs that track the S&P 500 or another index of primarily U.S. equities. Annual fund fees are capped at 0.1%, keeping costs low.
You will not be picking individual stocks or bonds. The idea is simple, long-term, diversified growth.
What About Taxes?
This is where it gets a little nuanced:
- Contributions are not tax deductible. You are putting in after-tax dollars.
- Growth is tax-deferred. You will not owe taxes on dividends or capital gains while the money is in the account.
- Withdrawals are split. When your child eventually takes money out, the portion that came from contributions comes out tax-free (since you already paid tax on it). But any earnings or growth are taxed at your child’s ordinary income tax rate.
Penalty-free uses after age 18: College expenses and first-time home purchases. If funds are withdrawn before age 59½ for other purposes, a 10% early withdrawal penalty applies on top of the income tax.
How Does It Compare to Other Options?
| Feature | Trump Account | 529 Plan | Custodial Account (UTMA) |
|---|---|---|---|
| Tax on contributions | Not deductible | State deduction in some states | Not deductible |
| Growth | Tax-deferred | Tax-free (if used for education) | Taxed annually (kiddie tax may apply) |
| Withdrawals | Earnings taxed as income | Tax-free for education | Taxed at favorable capital gains rates |
| Use restrictions | Penalty-free for college, first home | Must be used for education (or pay penalty) | No restrictions |
| Contribution limit | $5,000/year | Varies by state (typically much higher) | No federal limit |
| Control | Child owns at 18 | Parent retains control | Child owns at age of majority |
There is no single “best” account — it depends on your goals. If you are saving specifically for education, a 529 is still hard to beat. If you want flexibility with no restrictions, a custodial account gives you that. The Trump Account sits in between, offering tax-deferred growth with moderate flexibility.
How to Open One
Parents or legal guardians can open a Trump Account by filing IRS Form 4547 (Trump Account Election). You can do this now at trumpaccounts.gov. Financial contributions to the accounts begin on July 4, 2026.
Each child can only have one Trump Account, and only an authorized individual — typically a parent or legal guardian — can open it.
The Bottom Line
If your child was born between 2025 and 2028, opening a Trump Account is essentially free money — there is very little reason not to claim the $1,000 deposit.
For older children who do not qualify for the government seed, the decision is more personal. The tax-deferred growth is a nice benefit, but depending on your family’s situation, you may get more mileage from a 529 or custodial account — or some combination of all three.
As always, the right answer depends on your specific financial picture. If you would like to talk through how a Trump Account fits into your family’s overall plan, we are here to help.
Jeremy Roman, EA — Owner, R Tax Services, Evansville, Indiana