If you’ve heard about the new “Trump Accounts” announced in the OBBBA and are wondering what they actually are, you’re not alone. We as professionals liked the concept but the details are always critical. The implimentation mechanics are still being ironed out.
Beginning in 2026, a new type of savings account—called a Trump Account—will become available for children under age 18. These accounts are intended to help families build long-term savings for children, supported by government contributions and favorable tax treatment. Below is a practical overview of how Trump Accounts work, their benefits, and what families should know ahead of time.
What Is a Trump Account?
A Trump Account is a special type of Individual Retirement Account (IRA) created exclusively for minors under age 18. While it shares some similarities with traditional IRAs, it is not a Roth IRA and follows its own distinct rules under federal tax law.
Each account must be established for the sole benefit of an eligible child (or their beneficiaries). Accounts may be created directly by the U.S. Treasury Secretary or by authorized individuals acting on the child’s behalf. Contributions are limited, and investments are tightly controlled to promote long-term, responsible growth. Specifically, funds may only be invested in certain low-cost vehicles that track broad U.S. stock market indexes.
Eligibility
To qualify, the beneficiary must:
Be under age 18 at the time the account is established
Have a valid Social Security number
Have the account formally designated as a Trump Account under Treasury rules
The program is clearly aimed at children and young families, with the goal of encouraging early, long-term saving.
Contribution Rules
Before the beneficiary turns 18, total contributions are capped at $5,000 per calendar year, with inflation adjustments beginning after 2027.
Certain contributions do not count toward the annual cap, including:
Qualified rollovers from other Trump Accounts
Government funding contributions
Contributions made through the Contribution Pilot Program
All contributions are made with after-tax dollars, meaning there is no tax deduction. Additionally, contributions cannot begin until at least 12 months after the law takes effect.
Investment Restrictions
Until the beneficiary reaches age 18, funds must be invested only in “eligible investments.” These are limited to mutual funds or ETFs that:
Track broad U.S. stock indexes (such as the S&P 500)
Have extremely low annual fees—no more than 0.10% of assets
The intent is to keep investments diversified, low-cost, and focused on steady long-term growth.
Withdrawals and Distributions
Generally, withdrawals are not permitted before the calendar year in which the beneficiary turns 18. Limited exceptions exist for certain rollovers or transfers, including transfers to ABLE accounts for disability-related expenses.
After age 18, distributions may be taken freely. When funds are withdrawn:
Contributions come out tax-free
Earnings are taxed at long-term capital gains rates, which are typically lower than ordinary income tax rates
If contributions exceed permitted limits, excess amounts must be withdrawn promptly, and penalties may apply to earnings attributable to those excess contributions.
Government and Employer Contributions
The law also establishes a Contribution Pilot Program, under which the federal government will make a one-time $1,000 contribution to eligible children’s Trump Accounts.
To qualify, a child must:
Be born after December 31, 2024, and before January 1, 2029
Be a U.S. citizen
Not have had a prior election made for this contribution
In addition, employers may contribute up to $2,500 per year to Trump Accounts for employees or their dependents through approved programs. These employer contributions are excluded from the employee’s taxable income, making them a tax-efficient benefit. Companies like JP Morgan Chase have signaled intention to contribute for employees. Private individuals such as Michael Dell have also pledged significant commitments to fund.
Account Management and Reporting
The Secretary of the Treasury is responsible for establishing the program and selecting trustees based on criteria such as regulatory compliance, customer service, reliability, and low costs.
Trustees must provide annual reports to both the IRS and account beneficiaries, detailing:
Contributions
Distributions
Fair market value
Several traditional IRA rules do not apply while the beneficiary is under age 18, reflecting the account’s unique design.
What Happens if the Beneficiary Dies Before Age 18?
If the beneficiary dies before the calendar year in which they would have turned 18, the Trump Account ceases to be treated as a Trump Account. The balance passes to the beneficiary’s estate or heirs, and the tax treatment of distributions changes accordingly.
Key Takeaways for Families
Trump Accounts are designed to help families begin saving early for a child’s financial future. While annual contributions are capped, the combination of government seed money, potential employer contributions, and disciplined investment rules creates a powerful long-term framework. Investments are limited to low-cost, broad-market funds, and withdrawals are restricted until adulthood, encouraging uninterrupted growth. After age 18, distributions are taxed at long-term capital gains rates.
Overall, Trump Accounts represent a structured, transparent, and tax-efficient approach to helping children build a financial foundation as they move into adulthood.
Frequently Asked Questions
Who can open a Trump Account?
Accounts are opened by the U.S. Treasury Secretary or authorized individuals on behalf of eligible children under age 18 with Social Security numbers.
Who can contribute?
Parents, relatives, employers, and others may contribute, subject to the annual contribution limits.
Are contributions deductible?
No. All contributions are made with after-tax dollars.
Can funds be accessed before age 18?
Generally no, except for limited rollovers or transfers, such as to ABLE accounts.
How are funds invested?
Only in low-cost mutual funds or ETFs tracking broad U.S. stock indexes without leverage.
How are earnings taxed?
Earnings grow tax-deferred and are taxed at long-term capital gains rates when withdrawn after age 18.
Is there government support?
Yes. Eligible children may receive a one-time $1,000 contribution through the Contribution Pilot Program.