The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, introduced a new savings vehicle called Trump Accounts — tax-advantaged accounts designed to give children a financial head start. Here’s what you need to know.
What Is a Trump Account?
Trump Accounts are tax-deferred savings accounts for children under age 18, structured as a type of traditional IRA. What sets them apart: the federal government, employers, and eligible nonprofits can also contribute — not just family members. No earned income is required.
Who Can Open One?
A parent or guardian can establish a Trump Account for any child with a valid Social Security number who has not yet turned 18. Only one account is permitted per child.
How to Open an Account
Accounts are expected to become available on or around July 4, 2026. To open one, file IRS Form 4547 with your federal tax return or register through the TrumpAccounts.gov online portal.
The $1,000 Federal Seed Contribution
U.S. citizen children born between January 1, 2025 and December 31, 2028 are eligible for a one-time $1,000 federal deposit at no cost to the family. This deposit is not automatic — an eligible parent or guardian must elect to receive it when establishing the account.
Contribution Rules
- Annual maximum: $5,000 per account from individual and employer contributions combined. The $1,000 federal seed, qualified contributions from nonprofits, and qualified rollovers do not count toward this cap.
- Who can contribute: Parents, grandparents, family, friends, employers (up to $2,500/year, excluded from employee taxable income), and qualifying nonprofits or state programs
- Contributions are made with after-tax dollars and are not tax-deductible
- Trump Account contributions do not reduce any separate IRA contribution limits
Investment Requirements
During the growth period (birth through December 31 of the year before the child turns 18), funds must be invested in low-cost mutual funds or ETFs tracking a broad index of primarily U.S. equities — such as S&P 500 index funds — with expense ratios at or below 0.1% and no use of leverage.
Distribution Rules
Withdrawals are generally prohibited before January 1 of the calendar year in which the child turns 18. After that date, the account is treated as a traditional IRA and subject to standard IRA rules — including ordinary income tax on withdrawals and a potential 10% early withdrawal penalty before age 591⁄2.
Planning Considerations
Trump Accounts work best as a complement to existing vehicles like 529 plans, custodial Roth IRAs, and UTMAs — not a replacement. At age 18, the account holder can withdraw funds, keep the account invested under traditional IRA rules, or convert to a Roth IRA. Families saving for education should note that 529 plans still offer tax-free withdrawals for qualified education expenses, which Trump Accounts do not.
Details and guidance from the IRS continue to develop. Always verify with official sources at IRS.gov before making financial decisions.
Want to Learn More?
Contact us at Concentrum Wealth Management to get started.