Introduction
Trump Accounts (TAs) are a new tax-advantaged savings tool created under the One Big Beautiful Bill Act (OBBBA). They are designed to help children build long-term savings. Eligible children born between 2025 and 2028 can receive a $1,000 government-funded contribution to start their account. Older children under 18 with a Social Security number can also open a TA, though they won’t qualify for the initial government contribution.
Getting Started
Parents can set up a TA by filing Form 4547, “Trump Account Election(s),” with their federal tax return or through an online portal expected to launch in summer 2025. Beginning July 3, 2026, families and other individuals can contribute up to $5,000 annually (adjusted for inflation starting in 2028) until the child turns 18. The $1,000 government contribution is separate from this annual limit.
Other Contributions
Employers may contribute up to $2,500 annually (adjusted for inflation starting in 2028) to a TA for an under-18 employee or their dependent. These contributions are excluded from taxable income but count toward the $5,000 annual limit. Additionally, governments and nonprofit organizations can make tax-free contributions under IRS rules. These contributions are not subject to the $5,000 limit and must be offered to all children in a qualified group.
Tax Treatment and Investment Rules
Individual contributions are not tax-deductible, but account earnings grow tax-deferred. Withdrawals generally cannot be made before the child turns 18. Until then, investments are limited to low-cost mutual funds or ETFs that track qualified indexes, avoid leverage, and meet IRS criteria.
After Age 18
When the child turns 18, the TA automatically converts into a traditional IRA. At that point, contributions require earned income and follow standard IRA rules. Withdrawals are allowed but may be taxable and subject to early withdrawal penalties. Leaving funds invested allows continued tax-deferred growth.
Weighing Your Options
If your child qualifies for the $1,000 government contribution, opening a TA is a smart move to capture free money and long-term growth. For example, contributing $5,000 annually for 17 years at a 5% return could grow to about $138,000 by age 18. If left invested until age 65, the account could reach nearly $1.44 million. However, if your goal is education savings, a Section 529 plan may be more suitable since qualified education withdrawals are tax-free and leftover funds can be converted to a Roth IRA.
Learn More
Trump Accounts can be a powerful savings tool, especially for families able to make consistent contributions. For guidance on TAs or other tax-advantaged savings options, consult a financial advisor.