One of the more novel provisions of the One Big Beautiful Bill Act is the creation of a new type of tax-advantaged savings account for children: the Trump Account. Established under new Internal Revenue Code Section 530A, these accounts combine features of an IRA and a 529 plan, but with a key difference from both -- the money is not locked to education expenses and can be used for anything once the child reaches adulthood. Here is a complete breakdown of how Trump Accounts work, who can open one, and what the tax rules are.
What Is a Trump Account?
A Trump Account is a tax-advantaged individual retirement-style account designed specifically for children under age 18 who are U.S. citizens with a valid Social Security number. The accounts were created by the One Big Beautiful Bill Act (OBBBA), signed July 4, 2025, under OBBBA Section 70204 and codified at IRC Section 530A.
Think of a Trump Account as a specialized IRA for minors. Contributions are made with after-tax dollars (no upfront deduction), but the money grows tax-free during the child's growth period -- from account opening through December 31 of the year the child turns 17. At age 18, the balance rolls into a Rollover Trump Account and the child gains control, able to use the funds for any purpose without restriction.
Who Can Open a Trump Account?
A Trump Account can be opened by any authorized individual: a parent, grandparent, legal guardian, adult sibling, or other adult acting on behalf of an eligible child. To be eligible, a child must:
- Be a U.S. citizen or resident alien
- Have a valid Social Security number
- Be age 17 or younger at the close of the tax year
There are no income limits for parents or guardians opening an account or making contributions.
The Federal $1,000 Seed Contribution
Children born between January 1, 2025, and December 31, 2028, are eligible for a one-time $1,000 pilot program contribution from the federal government -- essentially a free seed deposit into the account.
To receive this $1,000, a parent or guardian must file IRS Form 4547 electing into the program. An online opt-in at trumpaccounts.gov is also expected to be available in mid-2026. The IRS and Treasury will verify eligibility and the contribution will be deposited into the account. No contributions -- from the government or anyone else -- can be made before July 4, 2026.
If you have a child born between 2025 and 2028, filing Form 4547 to claim the $1,000 seed is worth doing even if you do not plan to make additional contributions yourself. The seed grows tax-free until the child turns 18.
Contribution Limits and Rules
Annual contributions to a Trump Account are capped at $5,000 per child for 2026 and 2027, with the limit indexed for inflation in $100 increments starting in 2028. Anyone can contribute -- parents, grandparents, friends, aunts, uncles -- and all contributions count toward the same $5,000 per-child annual limit.
Employers can also contribute to Trump Accounts on behalf of employees' children, up to $2,500 per employee per year. Employer contributions reduce the amount individuals can contribute for that child in the same year. If an employer contributes $2,500, the family can only contribute another $2,500 before hitting the $5,000 cap.
Government entities and qualifying charities can also make general contributions to Trump Accounts for broad classes of beneficiaries, and those contributions are not subject to the $5,000 annual cap.
Contributions are not deductible. You do not get a tax deduction for putting money into a Trump Account, similar to how Roth IRA contributions are not deductible. The tax benefit is on the growth side: earnings accumulate tax-free.
Investment Rules
Trump Accounts have strict investment restrictions during the growth period. Funds must be invested in eligible mutual funds or exchange-traded funds (ETFs) that:
- Have total annual fees and expenses of no more than 0.1% (10 basis points) of the total investment balance
- Consist of equity investments in United States companies
- Track a qualified index
In practice, this means broad U.S. stock index funds with very low expense ratios -- similar to index funds tracking the S&P 500 or total U.S. market. Actively managed funds, international funds, bond funds, and high-fee funds do not qualify during the growth period.
When Can the Money Be Used?
During the growth period -- from account opening until December 31 of the year the child turns 17 -- withdrawals are generally not permitted. On January 1 of the calendar year in which the child turns 18, the balance rolls into a Rollover Trump Account and the now-adult beneficiary can withdraw the funds for any reason without restriction. There is no requirement to spend the money on education, a home purchase, or any other specified purpose.
This is the most significant difference from a 529 plan. A 529 restricts spending to qualified education expenses (with some recent flexibility added for Roth IRA rollovers). A Trump Account has no such restriction at distribution. The child can use the money for college, a down payment, starting a business, or simply to invest further.
How Are Withdrawals Taxed?
The tax treatment at withdrawal depends on the source of the contributions:
- Distributions attributable to parental or individual after-tax contributions: tax-free at withdrawal, since the contributions were made with after-tax dollars and grew tax-free.
- Distributions attributable to employer contributions or government contributions: taxable at the beneficiary's ordinary income tax rate at the time of withdrawal, since those contributions were not previously taxed.
This means good record-keeping matters. You will want to track which portion of the account balance came from after-tax individual contributions versus employer or government contributions, since the tax treatment at age 18 differs.
Gift Tax Considerations
Contributions to a Trump Account do not automatically qualify for the annual gift tax exclusion (currently $19,000 in 2026). This is because the child does not have access to the money during the growth period -- a requirement for the "present interest" rule that makes annual exclusion gifts tax-free without filing. As a result, larger contributions from grandparents or others may require filing IRS Form 709 (Gift Tax Return) depending on the amount. Congress did not carve out a specific exception for Trump Accounts the way it did for 529 plans. Watch for potential legislative fixes on this point in future tax bills.
How to Open a Trump Account
Accounts can be opened beginning July 4, 2026 -- one year after the OBBBA was signed. The process involves:
- Completing IRS Form 4547 or using the trumpaccounts.gov online portal when it becomes available
- Selecting an authorized trustee (institutions approved by the U.S. Treasury to administer Trump Accounts)
- Designating the eligible child as beneficiary with their Social Security number
- Making your first contribution on or after July 4, 2026
If your child was born between January 1, 2025, and December 31, 2028, and you want the $1,000 federal seed contribution, file Form 4547 as soon as the process opens. The seed contribution is contingent on making the election -- it is not automatic.
Trump Account vs. 529 Plan vs. Roth IRA
Here is how Trump Accounts compare to the two most common savings vehicles parents use for children:
Compared to a 529 plan: A 529 offers a state tax deduction in many states for contributions, and withdrawals for qualified education expenses are tax-free. A Trump Account offers no deduction but allows tax-free growth with no restriction on how the money is used at age 18. If you are saving specifically for college, a 529 may still make more sense, especially if your state offers a meaningful deduction. If you want flexibility, the Trump Account wins.
Compared to a custodial Roth IRA: A child can only contribute to a Roth IRA if they have earned income. A Trump Account has no earned income requirement -- anyone can contribute on behalf of any eligible child. A Roth IRA has no age restriction on withdrawals (after age 59.5 and a 5-year holding period). A Trump Account is locked until age 18.
Key Facts Summary
- Account type: tax-advantaged savings account for children under 18 (IRC Section 530A)
- Annual contribution limit: $5,000 per child (2026-2027); indexed for inflation starting 2028
- Federal seed: $1,000 for children born January 1, 2025 through December 31, 2028; requires Form 4547 election
- Who can contribute: anyone -- parents, grandparents, employers (up to $2,500), governments, charities
- Employer limit: $2,500 per child per year (reduces individual limit)
- Contributions: after-tax, no deduction
- Growth: tax-free during growth period
- Investments: low-cost U.S. equity index funds only; max 0.1% expense ratio
- Access: beginning January 1 of the year the child turns 18; no spending restrictions
- Tax at withdrawal: tax-free for individual contributions; ordinary income for employer/government contributions
- Accounts open: July 4, 2026
- Income limits: none
Trump Accounts are still new and some regulations remain proposed rather than final. The IRS and Treasury issued Notice 2025-68 and proposed regulations in March 2026, with the final rules expected before the July 4, 2026 opening date. If you are considering opening one, monitor the IRS OBBBA guidance page and trumpaccounts.gov for updates. And if you have a child born between 2025 and 2028, the $1,000 federal seed contribution makes opening an account a straightforward decision -- free money that grows tax-free for up to 18 years is hard to pass up. See our OBBBA overview for a full summary of all the tax changes from the One Big Beautiful Bill Act.