In mid-2025, Congress passed and the White House signed the One Big Beautiful Bill Act, a sweeping tax and spending law that, among many provisions, created a new tax-advantaged savings vehicle for children called Trump Accounts.
Here’s what taxpayers need to know.
What are Trump Accounts and Why Do They Matter?
A Trump Account is a federal tax-advantaged savings/investment account established for the benefit of a child (a U.S. citizen with an SSN). “Trump Account” is the official name used in the statute creating this account type. Unlike traditional education accounts like 529s or custodial accounts, Trump Accounts are designed to function very similarly to an IRA — but for minors and without an earned income requirement.
Key Features of Trump Accounts
1. Eligibility & Establishment
- A Trump Account may be established on behalf of any eligible child under age 18.
- Accounts cannot receive contributions before July 4, 2026 — the implementation date under the law.
- Only one account per child can be created.
2. Federal Seed Contribution
- Children born between January 1, 2025 and December 31, 2028 are eligible for a one-time $1,000 federal contribution to their Trump Account.
- This initial contribution does not count against annual contribution limits.
3. Contribution Rules
- Individuals — Parents, relatives, and others — may contribute up to $5,000 per year per child until the child turns 18.
- Employers can contribute up to $2,500 per year toward an employee’s account without treating it as taxable income for the employee.
- Certain tax-exempt organizations may exceed the $5,000 cap in specified circumstances.
4. Investment Requirements
- Funds must be invested in diversified U.S. equity funds (e.g., broad market mutual funds or index ETFs).
- This is intended to promote long-term growth but limits investment choices.
Tax Treatment & Distributions
Tax-Deferred Growth
- Earnings within a Trump Account grow tax-deferred until withdrawal – just like an IRA
Withdrawal Rules
- No distributions are allowed before the account beneficiary reaches age 18.
- After that age, distributions are treated much like a traditional IRA: earnings are generally taxable, and early distribution penalties can apply unless specific exceptions are met.
Because contributions are typically made with after-tax dollars, different portions of a distribution may be taxed differently — similar to how traditional IRA basis works.
What Trump Accounts Are Not
- They are not a direct government welfare payment or universal grant.
- They do not change Social Security or other entitlement programs.
- They do not replace existing savings vehicles like 529 plans — rather, they represent an additional option for long-term savings.
Planning Considerations for Families and Advisors
1. Timing & Eligibility
- No contributions before mid-2026 — important for planning in 2026 tax filings.
2. Interaction with Gift & Estate Tax Rules
- Contributions count toward annual gift tax exclusion limits.
3. State Tax Conformity Risks
- Some states may not conform to the federal tax treatment (e.g., California treats earnings differently).
4. Opportunity Cost
- Because investment choices are limited to index-type funds, advisors should compare Trump Accounts with other planning tools (Roth IRAs, 529 plans, custodial accounts) based on each family’s goals.
Getting Started
To establish that you want to create an account for your child, you’ll need to file Form 4547. Filing this form makes the election to establish an initial Trump Account for the benefit of a child who is eligible. It also establishes who will be the guardian of the account and if you wish to (if eligible) receive the $1,000 seed contribution. Because these accounts will not be available until July 5, 2026, you have two options.
1. We can file this with your electronically filed tax return.
2. You can complete and mail the form separately at your convenience.
Bottom Line
Trump Accounts are now established federal law as of 2025, thanks to the One Big Beautiful Bill Act. They provide a new, tax-advantaged way to build long-term savings for children, with federal seed money for eligible children and structured investment requirements.
For families and advisors, understanding the rules, timing, and interaction with existing tax planning vehicles will be critical as these accounts come into effect in mid-2026.