What are Trump accounts?

To be eligible, a child must be a U.S. citizen under 18 and have a Social Security number. Each child is allowed only one Trump Account.

First, check to see whether you’re an “authorized individual” to open the account on their behalf. Generally, the priority order is legal guardians, parents, adult siblings and grandparents. Someone is authorized to open the account only if those who would have had higher priority aren’t available to open it (and no one who has the same priority has opened one already).

Assuming you’re authorized to open the account, the next step is to explore whether your child qualifies for free money, from the federal government, a philanthropic source, or via employer benefits. If so, consider opening an account to get the money by filing IRS Form 4547 (on paper or online) with your tax return or separately with the IRS. 

There’s one additional caveat – if you’re opening the account and electing a pilot program contribution (the free seed money from the federal government), the child must be your qualifying child for the Child Tax Credit for the year in which you’re making the election.

Of course, choosing to invest money in a Trump Account should be considered as part of your broader financial goals, so consulting with a financial advisor may help you ensure funding these accounts is consistent with your overall financial plan.

A child can receive up to $5,000 a year in their account (the amount will be indexed for inflation after 2027), from all sources including employers but not including federal seed money or philanthropic contributions that are targeted to specific populations.

Contributions for a specific year must be made within that calendar year (unlike other types of IRAs which allow contributions until April 15th of the following year).

A pilot program for children who are U.S. citizens born between 2025 and 2028 offers a one-time deposit of $1,000 from the federal government. The authorized individual opening the account must file IRS Form 4547 to receive it (it can be filed on paper or online, with a tax return or separately).

Employers can offer contributions of up to $2,500 per year as a benefit. State governments and charities can also offer contributions to specific populations. Employer contributions count toward the annual limit; contributions by the government or charities don’t.

One well-publicized funding source comes via a philanthropic gift from the Michael and Susan Dell Foundation. That $250 contribution is targeted to children under age 10 who live in zip codes where the median income is under $150,000. If you think your child might qualify, you’ll want to move quickly on opening the account, since only the first 25 million qualifying children will receive the gift.

Anyone can contribute to a child’s account, but the total contributions can’t be more than the annual maximum.

Each account has these roles associated with it:

Beneficiary: the child for whom the account was opened and its official owner.

Account opener: the person opening the account on behalf of the child. They must be the beneficiary's legal guardian, parent, adult sibling or grandparent, in that order of priority. This is the person who will be responsible for the account until the child reaches age 18.

Contributors: anyone who contributes money to the account including parents, grandparents, other relatives and friends, as well as employers, the federal government, state and local governments, and nonprofit organizations.

Trustee: the financial firm that administers the account, such as a bank or investment company.

The contributions are not tax deductible, but earnings in the account grow federal tax-deferred. (Some states will tax earnings on an ongoing basis.) Qualified earnings withdrawals are taxed as ordinary income like traditional IRA income. Contributions that have already been taxed will be tax-free on withdrawal; contributions that haven’t been taxed (from employers or seed money) will be taxed as income. For all taxable withdrawals, there may be a 10% penalty before age 59½ unless an exception (for example, using the money for higher education) applies.

Based on the IRS draft Form 5498-TA , the basis of contributions (which informs how much of future distributions will be taxable) will be tracked by the trustee. We expect more information about tax reporting and forms to be released over time.

Initially, all accounts will be invested in the State Street SPDR Portfolio S&P 500 ETF. There are a few other predefined broad-market stock ETFs that will be available in the coming months, all with a maximum 0.10% expense ratio. 

Initially, all accounts will be administered by the Treasury Department in partnership with the Bank of New York and Robinhood. Rollovers to another provider are allowed but it’s unclear at this point what providers will offer Trump Accounts.

Withdrawals are generally prohibited before age 18. The money is intended to be used for long-term investing, so taxable withdrawals before the age of 59½ may be penalized, although the usual IRA early withdrawal exceptions apply (for example, a first-time home purchase or higher education).

Importantly, your child gains full control of the money at age 18 and can do whatever they want with it.