Trump Accounts: A New Savings Tool for Children
July 9, 2026
What families should know about the new tax-advantaged accounts created by the One Big Beautiful Bill Act.
What Are Trump Accounts?
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, created a new type of savings account designed to help American children build long-term wealth. Called Trump Accounts, they work similarly to an IRA but are set up for children, and unlike a traditional IRA, the child does not need to have a job or earned income to benefit.
These accounts are expected to be managed by the Treasury Department initially, though funds can later be moved to a private brokerage firm. Contributions opened on July 4, 2026.
Who Is Eligible?
Any U.S. citizen child under 18 with a Social Security number can have a Trump Account opened on their behalf. There are no income limits for the family. You can elect to open an account by filing Form 4547 with your 2025 tax return or through an online portal at trumpaccounts.gov, which is expected to launch in July 2026.
If you have children who qualify, we recommend filing Form 4547 with your 2025 return (if not yet filed; or it can be separately filed by mail or on the online portal at trumpaccounts.gov), that way the account is ready when contributions open.
A grandparent can use Form 4547 to open a Trump Account for a grandchild, but only as a fallback the priority order is legal guardian, then parent, then adult sibling, then grandparent, so a grandparent qualifies only when none of those closer relatives is available to file.
Grandparents can put money into a grandchild's Trump Account once it has been opened, because the rules let anyone, the child, the parents, the grandparents, or any other person, to contribute to an existing account (all such contributions share a combined annual limit of $5,000, and contributions can't begin until July 4, 2026); the priority order that ranks grandparents behind guardians, parents, and adult siblings only governs who is allowed to open the account in the first place, not who can fund it afterward.
The $1,000 Government Contribution
One of the most notable features is a one-time $1,000 contribution from the federal government for children born between January 1, 2025, and December 31, 2028. This deposit does not count against the annual contribution limit and costs your family nothing. It is essentially free money.
How the Money Is Invested
While the child is under 18, investment options are intentionally simple and low-cost. Funds must go into mutual funds or ETFs that track a broad U.S. stock index (like the S&P 500), they must hold at least 90% U.S. companies, use no leverage, and charge expense ratios of 0.10% or less. Think of it as a long-term, set-it-and-forget-it style investment in the U.S. stock market.
When Can the Money Be Accessed?
During the growth period (before age 18), withdrawals are essentially off-limits. There are no hardship exceptions. The only permitted distributions are rollovers to another Trump Account, transfers to an ABLE account for a disabled child, corrections of excess contributions, and distributions upon death.
When the child turns 18, the account converts to a traditional IRA. At that point, standard IRA withdrawal rules apply. Early withdrawals (before age 59 ½) generally trigger income tax plus a 10% penalty, but there are exceptions for qualified education expenses, a first-time home purchase (up to $10,000), birth or adoption costs, and disability.
How Are Withdrawals Taxed?
The tax treatment depends on the source of the funds:
A Gift Tax Issue You Should Know About
There was an unresolved question affecting families who made personal contributions to a Trump Account. Updated guidance now provides a partial fix, but it's important to understand the nuance, especially if you don't meet the safe harbor. Here's the issue in plain terms:
When you contribute to a 529 college savings plan for a child or grandchild, the law specifically says that contribution qualifies for the annual gift tax exclusion ($19,000 per person in 2026), which means that no gift tax paperwork is required for normal contributions. Congress included clear language in the 529 rules to permit this.
No equivalent language was included for Trump Accounts. Because the child cannot access the money until age 18, a strict reading of existing gift tax rules could treat your contribution as a gift of a “future interest,” which would not qualify for the annual exclusion. If that interpretation holds, every personal contribution may require you to file IRS Form 709 (the gift tax return), even for small amounts.
This is widely regarded as a drafting oversight, and professional organizations urged Treasury and the IRS to address it through guidance. The IRS responded with Rev. Proc. 2026-25, which gives taxpayers a safe harbor for certain contributions to Trump Accounts. Under the safe harbor, qualifying contributions can use the annual gift tax exclusion, meaning donors generally do not need to file a gift tax return simply because they contributed to a Trump Account. A more comprehensive and permanent fix that places Trump Accounts on the same statutory footing as 529 plans, may require a change in the law.
The catch is that the safe harbor is narrow. To qualify, the donor must be an individual, must limit their taxable gifts for the year to cash contributions to Trump Accounts, must stay within the annual exclusion for each beneficiary, and must have no other reason to file Form 709. Bottom line: this is helpful relief, but anyone making larger gifts, gifts through a trust or entity, or additional gifts to the same beneficiary outside the Trump Account should be careful before assuming the safe harbor applies.
Planning Opportunities to Discuss with Your Advisor
Roth Conversion at Age 18: When your child turns 18 and the account converts to a traditional IRA, there may be an opportunity to convert it to a Roth IRA while the child has little or no income. Only the pre-tax components (earnings, government and employer contributions) are taxed on conversion. If done at the right time, the tax cost can be minimal, and the child gets tax-free growth for the rest of their life.
Employer Benefit for Business Owners: If you own a business, you can offer Trump Account contributions as an employee benefit. Your company’s contribution (up to $2,500 per employee, per year) is fully tax-deductible for the business and tax-free to the employee. This is a simple, low-cost benefit that can help with recruitment and retention.
Coordination with 529 plans: TRUMP Accounts do not replace 529 plans. For education savings, 529s still offer clearer gift tax treatment, tax-free withdrawals for educational expenses, and more favorable financial aid treatment. Trump Accounts are better thought of as a general-purpose wealth-building account that the child will fully control at 18. Many families will benefit from using both.
Key Takeaways
Trump Accounts are a meaningful new addition to the family financial planning toolkit, especially for children born 2025-2028 who qualify for the $1,000 government contribution. The most important step right now is to file Form 4547 with your 2025 return if not yet filed; or it can be separately filed by mail or on the online portal at trumpaccounts.gov. Beyond that, take advantage of employer and charitable contributions, keep good records, and consider holding off on personal contributions until the gift tax issue is resolved. Rest assured we’re monitoring this closely and will update you as guidance develops.
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, created a new type of savings account designed to help American children build long-term wealth. Called Trump Accounts, they work similarly to an IRA but are set up for children, and unlike a traditional IRA, the child does not need to have a job or earned income to benefit.
These accounts are expected to be managed by the Treasury Department initially, though funds can later be moved to a private brokerage firm. Contributions opened on July 4, 2026.
Who Is Eligible?
Any U.S. citizen child under 18 with a Social Security number can have a Trump Account opened on their behalf. There are no income limits for the family. You can elect to open an account by filing Form 4547 with your 2025 tax return or through an online portal at trumpaccounts.gov, which is expected to launch in July 2026.
If you have children who qualify, we recommend filing Form 4547 with your 2025 return (if not yet filed; or it can be separately filed by mail or on the online portal at trumpaccounts.gov), that way the account is ready when contributions open.
A grandparent can use Form 4547 to open a Trump Account for a grandchild, but only as a fallback the priority order is legal guardian, then parent, then adult sibling, then grandparent, so a grandparent qualifies only when none of those closer relatives is available to file.
Grandparents can put money into a grandchild's Trump Account once it has been opened, because the rules let anyone, the child, the parents, the grandparents, or any other person, to contribute to an existing account (all such contributions share a combined annual limit of $5,000, and contributions can't begin until July 4, 2026); the priority order that ranks grandparents behind guardians, parents, and adult siblings only governs who is allowed to open the account in the first place, not who can fund it afterward.
The $1,000 Government Contribution
One of the most notable features is a one-time $1,000 contribution from the federal government for children born between January 1, 2025, and December 31, 2028. This deposit does not count against the annual contribution limit and costs your family nothing. It is essentially free money.
How the Money Is Invested
While the child is under 18, investment options are intentionally simple and low-cost. Funds must go into mutual funds or ETFs that track a broad U.S. stock index (like the S&P 500), they must hold at least 90% U.S. companies, use no leverage, and charge expense ratios of 0.10% or less. Think of it as a long-term, set-it-and-forget-it style investment in the U.S. stock market.
When Can the Money Be Accessed?
During the growth period (before age 18), withdrawals are essentially off-limits. There are no hardship exceptions. The only permitted distributions are rollovers to another Trump Account, transfers to an ABLE account for a disabled child, corrections of excess contributions, and distributions upon death.
When the child turns 18, the account converts to a traditional IRA. At that point, standard IRA withdrawal rules apply. Early withdrawals (before age 59 ½) generally trigger income tax plus a 10% penalty, but there are exceptions for qualified education expenses, a first-time home purchase (up to $10,000), birth or adoption costs, and disability.
How Are Withdrawals Taxed?
The tax treatment depends on the source of the funds:
- Your personal contributions: Not taxed again on withdrawal (you already paid tax on this money).
- Investment earnings: Taxed as ordinary income when withdrawn.
- Government, employer, and charity contributions: Taxed as ordinary income when withdrawn.
A Gift Tax Issue You Should Know About
There was an unresolved question affecting families who made personal contributions to a Trump Account. Updated guidance now provides a partial fix, but it's important to understand the nuance, especially if you don't meet the safe harbor. Here's the issue in plain terms:
When you contribute to a 529 college savings plan for a child or grandchild, the law specifically says that contribution qualifies for the annual gift tax exclusion ($19,000 per person in 2026), which means that no gift tax paperwork is required for normal contributions. Congress included clear language in the 529 rules to permit this.
No equivalent language was included for Trump Accounts. Because the child cannot access the money until age 18, a strict reading of existing gift tax rules could treat your contribution as a gift of a “future interest,” which would not qualify for the annual exclusion. If that interpretation holds, every personal contribution may require you to file IRS Form 709 (the gift tax return), even for small amounts.
This is widely regarded as a drafting oversight, and professional organizations urged Treasury and the IRS to address it through guidance. The IRS responded with Rev. Proc. 2026-25, which gives taxpayers a safe harbor for certain contributions to Trump Accounts. Under the safe harbor, qualifying contributions can use the annual gift tax exclusion, meaning donors generally do not need to file a gift tax return simply because they contributed to a Trump Account. A more comprehensive and permanent fix that places Trump Accounts on the same statutory footing as 529 plans, may require a change in the law.
The catch is that the safe harbor is narrow. To qualify, the donor must be an individual, must limit their taxable gifts for the year to cash contributions to Trump Accounts, must stay within the annual exclusion for each beneficiary, and must have no other reason to file Form 709. Bottom line: this is helpful relief, but anyone making larger gifts, gifts through a trust or entity, or additional gifts to the same beneficiary outside the Trump Account should be careful before assuming the safe harbor applies.
Planning Opportunities to Discuss with Your Advisor
Roth Conversion at Age 18: When your child turns 18 and the account converts to a traditional IRA, there may be an opportunity to convert it to a Roth IRA while the child has little or no income. Only the pre-tax components (earnings, government and employer contributions) are taxed on conversion. If done at the right time, the tax cost can be minimal, and the child gets tax-free growth for the rest of their life.
Employer Benefit for Business Owners: If you own a business, you can offer Trump Account contributions as an employee benefit. Your company’s contribution (up to $2,500 per employee, per year) is fully tax-deductible for the business and tax-free to the employee. This is a simple, low-cost benefit that can help with recruitment and retention.
Coordination with 529 plans: TRUMP Accounts do not replace 529 plans. For education savings, 529s still offer clearer gift tax treatment, tax-free withdrawals for educational expenses, and more favorable financial aid treatment. Trump Accounts are better thought of as a general-purpose wealth-building account that the child will fully control at 18. Many families will benefit from using both.
Key Takeaways
Trump Accounts are a meaningful new addition to the family financial planning toolkit, especially for children born 2025-2028 who qualify for the $1,000 government contribution. The most important step right now is to file Form 4547 with your 2025 return if not yet filed; or it can be separately filed by mail or on the online portal at trumpaccounts.gov. Beyond that, take advantage of employer and charitable contributions, keep good records, and consider holding off on personal contributions until the gift tax issue is resolved. Rest assured we’re monitoring this closely and will update you as guidance develops.
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