TRUMP ACCOUNTS
TRUMP ACCOUNTS
A New Savings Option for Children — What Families Need to Know
Montage Wealth | Client Education Series
What Is a Trump Account?
The 2025 reconciliation law introduced a brand-new savings vehicle called a “Trump Account” — a special type of traditional IRA designed specifically for children under the age of 18. Accounts will officially open for enrollment on July 4, 2026.
Think of it as a long-term savings account a parent, grandparent, or guardian opens for a child today, with the goal of giving that child a financial head start that grows tax-deferred over decades.
Key benefit: Unlike traditional or Roth IRAs, Trump Accounts do not require the child to have earned income in order for family members to contribute — making them accessible for nearly any child.
The Government Will Seed the Account with $1,000
One of the most notable features of Trump Accounts is the one-time federal contribution: the U.S. Treasury will deposit $1,000 directly into a qualifying child's account once it is opened.
Who Qualifies for the $1,000?
- The child must be a U.S. citizen
- Born between January 1, 2025, and December 31, 2028
- Must have a work-authorized Social Security number
- The account must be opened by a parent or guardian who can claim the child as a dependent
This $1,000 does not count against the annual contribution limit — it's a true bonus on top of what families can contribute. Keep in mind that when this money is eventually withdrawn, it will be taxed as ordinary income at that time.
How Contributions Work
Who Can Contribute?
Almost anyone can put money into a child's Trump Account — parents, grandparents, other relatives, friends, and even employers. The key rule is that all contributions combined cannot exceed the annual limit.
Annual Contribution Limits
- $5,000 per year in 2026 (adjusted for inflation starting in 2027)
- This limit applies to the total of all contributions from all sources combined
- The $1,000 federal seed contribution does not count toward this limit
Tax Treatment of Contributions
- Individual contributions (from parents, grandparents, etc.) are not tax-deductible
- The child does not owe taxes when money is deposited
- Investment growth inside the account is tax-deferred — you don't pay taxes on it until withdrawal
Employer Contributions — A Nice Benefit
Employers can contribute up to $2,500 per year to a Trump Account on behalf of an employee or the employee's child. This is tax-free income for the employee and a deductible business expense for the employer. Note that employer contributions do count toward the $5,000 annual cap.
Practical note: If your employer offers Trump Account contributions as part of their benefits package, this is worth exploring — it’s essentially tax-free money going toward your child’s future.
Business Owners: A Potential Planning Opportunity
If you own a business and employ your children in it, the employer contribution feature may create an interesting tax planning angle. As an employer, you could potentially contribute up to $2,500 per year into your child’s Trump Account as a deductible business expense — on top of the wages you already pay them for legitimate work performed.
That said, this kind of strategy requires careful review to make sure it’s structured correctly and delivers the best overall tax outcome for your family. The interplay between business deductions, your child’s individual tax situation, and the Trump Account rules means there’s no one-size-fits-all answer here.
If you’re a business owner who employs your children, let’s talk. This may be worth exploring as part of your broader tax and financial planning — but the details matter, and we want to make sure it’s structured right for your specific situation.
How the Money Is Invested
During the growth period (while the child is under age 18), all funds in a Trump Account must be invested in diversified index funds that track U.S. stocks. The law requires these funds to minimize fees.
This means there's no picking individual stocks or actively managed funds during this phase. After the growth period ends, the account transitions to standard traditional IRA rules, which allow a much broader range of investments.
Think of it like this: the government is requiring a disciplined, low-cost, long-term investment approach for the child's early years — historically, this is actually a sound strategy.
When Can the Money Be Used?
During Childhood (The Growth Period)
In general, funds cannot be withdrawn before the year the child turns 18. The account is designed to be left alone to grow. The one exception: families can roll the account into an ABLE account (a tax-advantaged savings account for individuals with disabilities) during the year the child turns 17.
After Age 18 — Following Traditional IRA Rules
Once the growth period ends, the account follows the same rules as a standard traditional IRA. Withdrawals before age 59½ may be subject to a 10% early withdrawal penalty, unless an exception applies.
Penalty-Free Withdrawal Exceptions
- Higher education expenses
- First home purchase (up to $10,000)
- Birth or adoption of a child (up to $5,000)
- Emergency personal expenses (up to $1,000 per year)
- Certain medical expenses
How Withdrawals Are Taxed
The tax treatment at withdrawal depends on where the money originally came from:
- After-tax contributions (from parents, grandparents, etc.) come out tax-free
- Pre-tax contributions (employer, government, nonprofit) are taxed as ordinary income
- All investment gains are taxable upon withdrawal
Who Can Open a Trump Account?
The following individuals are authorized to open a Trump Account on a child's behalf:
- Parents
- Legal guardians
- Grandparents
- Adult siblings
To claim the $1,000 federal seed contribution, the account opener must be able to claim the child as a dependent for tax purposes. A child can only have one Trump Account, and the account must be opened before the end of the year in which the child turns 18.
The child must be a U.S. citizen with a work-authorized Social Security number.
How Trump Accounts Compare to Other Options
Trump Accounts fill a specific niche — particularly useful when a child has little or no earned income. Here's how they stack up against other popular savings vehicles:
| Feature |
Trump Account |
Custodial Roth IRA |
529 Plan |
Taxable Account |
| Annual Contribution Limit |
$5,000 (2026) |
Lesser of earned income or $7,500 (2026) |
No annual cap |
No limit |
| Earned Income Required? |
No |
Yes |
No |
No |
| Tax on Investment Growth? |
Deferred |
Tax-free (if qualified) |
Tax-free (if qualified) |
Yes, annually |
| Tax on Withdrawals? |
Yes (pre-tax portions) |
No (if qualified) |
No (if qualified) |
Yes |
| Withdrawal Before Age 18? |
Not permitted |
Contributions anytime; earnings with rules |
Qualified education expenses only |
Anytime |
| Investment Options |
U.S. stock index funds only |
Broad (stocks, bonds, funds) |
State-determined |
Unlimited |
| Federal $1,000 Seed Contribution? |
Yes (qualifying births 2025–2028) |
No |
No |
No |
Is a Trump Account Right for Your Family?
A Trump Account may make good sense if:
- You want to start building long-term savings for a child who has little or no earned income
- Your child was born between 2025 and 2028, and you want to capture the free $1,000 federal contribution
- Your employer offers Trump Account contributions as a workplace benefit
- You're looking for a simple, low-cost, index-based savings vehicle for a child
You may want to consider alternatives (like a custodial Roth IRA or 529 plan) if:
- Your child has earned income — a custodial Roth IRA typically offers better long-term tax advantages, since qualified Roth withdrawals are completely tax-free
- You want more investment flexibility
- You need the ability to access funds before the child turns 18
- Your primary savings goal is education expenses, where a 529 plan offers more targeted benefits
Bottom line: For children born 2025–2028 with little or no earned income, the free $1,000 government contribution makes opening a Trump Account worth considering — even if you also maintain a Roth IRA or 529 for the same child (just know there's an annual contribution limit to manage across accounts).
How to Apply for a Trump Account
Opening a Trump Account is straightforward. Accounts become available on July 4, 2026. Here’s what the process looks like:
Step 1 — Complete IRS Form 4547
The IRS has created Form 4547 specifically for ope ning a Trump Account. This form collects the necessary information about the child (beneficiary) and the account opener (authorized individual). You’ll need:
- The child’s full legal name and work-authorized Social Security number
- Confirmation of U.S. citizenship
- Your own information as the authorized opener (parent, grandparent, guardian, or adult sibling)
- The name of your chosen financial institution (trustee) to hold the account
Step 2 — Choose a Trustee Institution
A Trump Account must be held by an IRS-approved trustee — typically a bank, brokerage, or other qualified financial institution. During the growth period, the institution is required by law to invest the funds in a low-cost, diversified U.S. stock index fund.
Step 3 — Receive the Federal $1,000 Contribution
If your child qualifies (U.S. citizen, born 2025–2028, with a work-authorized Social Security number), the U.S. Treasury will deposit $1,000 directly into the account once it is opened. This happens automatically — no separate application is needed for the seed contribution.
For More Information
The official government resource for Trump Accounts is:
www.trumpaccounts.gov
This site will be updated with approved trustee institutions, downloadable forms, and step-by-step enrollment instructions as July 4, 2026 approaches.
Not sure where to start? We’re happy to walk you through the process and help you determine whether a Trump Account, a custodial Roth IRA, a 529, or a combination of accounts makes the most sense for your child’s future.
Questions about how Trump Accounts fit into your family's overall financial plan? Reach out — we're here to help you evaluate whether this is the right step for your situation.