The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, created a brand-new savings vehicle for children: the Trump account. These accounts are a special type of individual retirement account opened for a child, with tight rules on how money can be invested and when it can be withdrawn. Children born from 2025 through 2028 who meet eligibility requirements can also receive a one-time $1,000 deposit from the U.S. Treasury. This guide explains how Trump accounts work, who qualifies, the contribution rules, and how they compare with other ways to save for a child.
*This article is for general information only and is not financial or tax advice. Rules for this new account type are still being implemented, so check IRS guidance and consult a qualified professional before acting.*
What is a Trump account?
According to the IRS, a Trump account is a type of traditional IRA established for the exclusive benefit of an eligible child. It is set up as a trust or custodial account. Until the year the child turns 18, it follows special rules for what can be contributed, how it is invested, and when money can come out. The IRS calls this stretch the growth period. After it ends, most of those special rules fall away and the account generally follows traditional IRA rules.
Trump accounts have their own contribution limit, separate from any IRA the child might later open.
The $1,000 federal pilot contribution
A pilot program provides a one-time $1,000 contribution from the U.S. Treasury for eligible children. Generally, to qualify, a child must:
- Be born in 2025, 2026, 2027, or 2028.
- Be a U.S. citizen.
- Have a Social Security number.
A parent or other authorized person must elect the pilot contribution. The IRS says this can be done on Form 4547, Trump Account Election(s), filed with a tax return or on its own, or through the online application at trumpaccounts.gov. Form 4547 cannot be filed with an amended return.
Children born before 2025 are not eligible for the $1,000 seed money, but they may still be able to have a Trump account opened for them if they meet the general eligibility rules and have not reached the year they turn 18.
Who can have a Trump account
An election to establish a Trump account can be made any time before January 1 of the year the child turns 18. The child generally needs a Social Security number. The account is opened in the child’s name, and a parent or guardian typically manages it during the growth period.
Contribution rules
The IRS describes several types of contributions that can be made during the growth period:
- The $1,000 federal pilot contribution, for eligible children.
- Contributions from individuals, such as parents, grandparents, relatives, or friends.
- Employer contributions under a new section 128 program, which employers may offer for employees’ children.
- Qualified general contributions from governments or certain charitable organizations made to broad groups of children.
- Qualified rollovers from another Trump account.
Key limits and timing:
- No contributions could be made before July 4, 2026.
- Contributions from individuals and employers combined are generally limited to $5,000 per year per child, with the amount indexed for inflation in later years.
- Employer contributions are limited to $2,500 per year per employee and are excluded from the employee’s income, within that limit.
- The federal pilot contribution and qualified general contributions generally do not count against the $5,000 limit.
Contributions from parents and others are made after tax. They are not deductible, but they create basis in the account, which matters when money is eventually withdrawn.
How the money must be invested
During the growth period, Trump accounts must be invested in eligible investments, which are generally low-cost mutual funds or exchange-traded funds that track a broad index made up primarily of U.S. company stocks. Funds must meet low expense limits and cannot use leverage. This keeps the account simple and diversified, but it also means the account will rise and fall with the U.S. stock market.
When money can be withdrawn
Distributions are generally not allowed during the growth period, which ends on December 31 of the year the child turns 17. For example, the IRS notes that for a child born October 1, 2025, the growth period ends December 31, 2042.
After that, the account generally follows traditional IRA rules:
- Earnings and pre-tax amounts are taxed as ordinary income when withdrawn.
- After-tax contributions (basis) come out tax-free in proportion to the account balance.
- Withdrawals before age 59½ may face a 10% additional tax unless an exception applies. Traditional IRA exceptions include qualified higher education expenses and up to $10,000 for a first-time home purchase.
- The account can be rolled over to another IRA or eligible retirement plan, and the beneficiary may be able to convert it to a Roth IRA, paying tax on the taxable portion.
Trump accounts vs other ways to save for a child
Compared with a 529 plan
A 529 plan is designed for education. Earnings grow tax-free, and withdrawals for qualified education expenses are tax-free federally. Many states offer a state tax deduction for contributions. Contribution limits are much higher than $5,000 a year. However, non-education withdrawals face tax and a 10% penalty on earnings. If your main goal is college or K-12 private school, a 529 usually offers better tax treatment than a Trump account.
Compared with a custodial account
A custodial account under UTMA or UGMA can hold almost any investment and has no contribution limit, but earnings are taxable each year, potentially at the parents’ rate under the “kiddie tax.” The child gains control at the age of majority in their state, usually 18 or 21.
Compared with a Roth IRA for a minor
A custodial Roth IRA requires the child to have earned income, but qualified withdrawals in retirement are tax-free and contributions can be withdrawn at any time. For a teen with a part-time job, a Roth IRA may be more flexible than a Trump account.
Where Trump accounts fit
Trump accounts may make the most sense when:
- Your child is eligible for the free $1,000 pilot contribution. Claiming it costs nothing.
- Your employer offers contributions, which are tax-free money for your child.
- You want long-term, low-cost U.S. stock market exposure that the child cannot spend before adulthood.
Families with limited savings may prioritize their own emergency fund and retirement accounts before contributing extra money to any child account.
How to open a Trump account and claim the $1,000
- Get a Social Security number for your child, typically arranged at the hospital at birth.
- File Form 4547 with your tax return, separately, or through trumpaccounts.gov, and elect both the account and the pilot contribution if eligible.
- Follow Treasury instructions for activating the account with the designated trustee.
- Decide whether to add contributions. Family and employer contributions became allowed beginning July 4, 2026.
- Keep records of after-tax contributions, since they create basis that affects future taxes.
Frequently Asked Questions
Who gets the $1,000 Trump account deposit?
Eligible U.S. citizen children born from 2025 through 2028 with a Social Security number, if a parent or authorized person makes the election.
How much can I contribute to a Trump account each year?
Generally up to $5,000 per child per year from individuals and employers combined. Employer contributions are capped at $2,500 per employee.
Are contributions tax-deductible?
No. Contributions from parents and others are not deductible, but they create after-tax basis.
When can my child use the money?
Generally not until the growth period ends on December 31 of the year the child turns 17. After that, traditional IRA rules apply.
Can I use a Trump account for college?
After the growth period, withdrawals for qualified higher education expenses may avoid the 10% early withdrawal penalty, but earnings are still taxable. A 529 plan generally offers better tax treatment for education.
Can my child have both a 529 plan and a Trump account?
Yes. The accounts are separate, and families can use both.
The bottom line
Trump accounts are a new, long-term savings account for children, with a $1,000 federal deposit for eligible babies born 2025 through 2028, a $5,000 annual limit for family and employer contributions, and investments limited to low-cost U.S. stock index funds. Claiming the free seed money is a simple step for eligible families. Whether to add more depends on how it compares with a 529 plan, a custodial account, or your own retirement savings.
This article is for general informational purposes only and is not legal, medical, tax, or financial advice. Rules vary by state and change over time; confirm details with the relevant agency or a licensed professional.
