How the New Child Investment Accounts Work
Trump Accounts have quickly become a major topic in family financial planning. Designed to help families invest for a child’s future, these new tax-advantaged accounts may include government or private seed contributions for eligible children. While these new accounts have generated significant attention, many parents and grandparents are still wondering how they work, who qualifies, and whether they should be part of an overall financial strategy.
Here’s what families should know.
What are Trump Accounts?
Trump Accounts are a new type of tax-advantaged investment account for children, created under the One Big Beautiful Bill Act (OBBBA) and launched in July 2026. They are structured similarly to traditional IRAs for minors and are geared toward planning for the child’s retirement. The account is owned by the child, with a parent or legal guardian serving as custodian until the child reaches age 18.
Who is eligible?
A child is eligible to have an account opened if the child has a valid Social Security number and has not turned age 18 before the end of the calendar year in which the election is made. There is a limit of one Trump Account per child. Accounts may be opened online at trumpaccounts.gov or by filing IRS Form 4547.
How do contributions work?
Some children may qualify for initial “seed” contributions.
Federal Contribution
The U.S. Treasury will make a one-time $1,000 contribution for eligible children who are U.S. citizens, have a valid Social Security number, and were born between January 1, 2025, and December 31, 2028. This contribution is not automatic; enrollment is required.
Dell Contribution
A separate charitable commitment from Michael and Susan Dell will provide a one-time $250 contribution to eligible children, age 10 or younger, who live in ZIP codes with median household incomes below $150,000. Eligibility is based on the median income of the child’s ZIP code, not the family’s household income. Funding is limited and subject to program availability.
Other Contributions
Some states, private foundations, employers, and charitable organizations may also offer contributions to eligible accounts, subject to their own program rules. While these programs vary, every eligible child may open a Trump Account and receive contributions, regardless of whether they qualify for seed funding.
What are the rules on contributions?
Annual Limit
Contributions are subject to a combined annual limit of $5,000 per child for 2026 and 2027, with future inflation adjustments. Parents, grandparents, relatives, employers, and other contributors collectively share this annual limit.
Employer Contributions
Employers may contribute up to $2,500 per year tax-free to an employee’s child’s Trump Account. These contributions count toward the child’s annual contribution limit.
No Earned Income Required
Unlike traditional and Roth IRAs, a child does not need earned income to receive contributions during the accumulation period.
How are Trump Accounts taxed?
How Investment Growth Is Treated
Contributions are generally made with after-tax dollars and are not tax-deductible. Investments grow tax-deferred, meaning taxes are not owed on earnings while they remain in the account. For a child whose account is opened at birth, that can mean roughly 17 years of tax-deferred compounding before the calendar year the child turns 18.
Tax Treatment of Contributions and Earnings
Because family contributions are made with after-tax dollars, they generally are not taxed again when withdrawn. Investment earnings, along with applicable government and employer contributions, generally are taxable when withdrawn.
Gift Tax
Most family contributions will fall well below the federal annual gift tax exclusion, allowing family members to contribute without triggering gift tax reporting in most situations.
What are the investment options?
Until the child reaches age 18, funds must be invested in a low-cost mutual fund or ETF that tracks the S&P 500 or another broad-based U.S. stock market index. Individual stocks, bonds, cash holdings, and other non-qualifying investments are not currently available.
When can money be withdrawn?
Before Age 18
Funds generally cannot be withdrawn before the child turns 18, except in a few limited situations provided by law.
Age 18 and Beyond
Beginning January 1 of the calendar year the child turns 18, most traditional IRA rules apply to the account. Contributions from family members and other individuals generally create after-tax basis, which reduces the taxable portion of future withdrawals. Investment earnings and applicable government and employer contributions are taxable as ordinary income when withdrawn. The taxable portion of a withdrawal before age 59½ may also be subject to a 10% early-withdrawal penalty unless an exception applies.
How is a Trump Account different from a 529 plan?
Although both are designed to help families save for the future, Trump Accounts and 529 plans serve different goals.
A 529 plan remains one of the most effective tools for education savings, offering tax-free withdrawals for qualified education expenses, a potential state income tax deduction on contributions, and a broad range of investment options.
A Trump Account, by contrast, is designed as a long-term wealth-building vehicle that can continue into adulthood and ultimately retirement.
Rather than viewing these accounts as an either-or decision, many families may benefit from using both as part of a comprehensive financial plan. Once education savings are on track, families may consider directing some additional savings toward a Trump Account, particularly as college approaches and new 529 contributions have less time to generate tax-free earnings.
Can a Trump Account be converted to a Roth IRA?
Once the account converts to a traditional IRA at age 18, a Roth IRA conversion may be worth considering, potentially allowing future investment growth to occur tax-free. Keep in mind, however, that the timing of a conversion may be influenced by the kiddie tax rules, which apply to many young adults and may make delaying a conversion the more tax-efficient strategy.
Planning Takeaways
Like many financial planning strategies, the value of a Trump Account depends on the family’s overall goals. For some families, it may complement an existing college savings strategy. For others, it could provide an opportunity to begin long-term investing at a young age. A Trump Account should be evaluated alongside other planning tools, including 529 plans, retirement accounts, gifting strategies, and estate planning documents. Because Trump Accounts were established under recently enacted legislation, additional guidance and implementation details may continue to evolve. Determining how these accounts fit into your overall financial plan is a decision that can benefit from professional guidance. If you would like to learn more, please contact us.
