Trump Accounts – What They Are and How Do They Work?

Launching July 5, 2026, Trump accounts will be available. These are a new type of custodial individual retirement account (IRA) created by 2025 tax legislation. Trump accounts can be established for eligible children born in the calendar years of 2025 through 2028 - the years that Trump holds the presidency. The account is designated as a Trump account at establishment, and the eligible individual is both the owner and beneficiary of the account. The parent or guardian is the custodian of the account until the child turns 18. 

Parents can elect to open the Trump account for their child using IRS Form 4547, either when filing their 2025 tax return or through an online portal will be available in the summer of 2026.  

To be eligible, an election must be made to establish a Trump account before the calendar year in which the individual will turn 18, and child must have a valid social security number. 

A major advantage to establishing a Trump account is that the federal government will make a one-time $1,000 pilot program contribution to the account.  

Contribution Limits and Funding Rules 

There is an aggregate contribution limit of $5,000 per year to a Trump account. Contributions may be made by any person.  

In addition, an employer may contribute to an employees or employee’s decedent Trump account – up to $2,500 (counts against $5,000 limit) – and the contribution will not count toward the employee’s taxable income. 

The annual contribution limits are indexed to inflation and will begin adjusting after 2027. 

Investment Options 

The funds in Trump accounts must be invested in certain mutual funds or exchange-traded funds (ETFs) that track an index of primarily American equities. The intent is for assets to be invested in a diversified portfolio of low-cost index funds designed to maximize long-term growth while minimizing risk. 

Accessing Funds 

Funds in a Trump Account can be accessed without penalty when the child turns 18 for qualified expenses like education, a first home purchase, or starting a business. Withdrawals may be subject to restrictions and are taxed at ordinary income rates. Outside of these special rules, a Trump account is treated similarly to a traditional IRA. 

Tax Treatment 

A Trump account operates much like a traditional IRA, with special rules in place until the beneficiary turns 18. The account grows tax-deferred, and unlike a traditional IRA, contributions can be made even if the child does not have earned income.  

Contributions with after tax money create basis in the account. Qualified contributions, including the $1,000 seed funding, do not create basis.  

After the growth period (period before the child attains age 18), most of the special rules for Trump accounts cease to apply, and the account will be treated similarly to a traditional IRA, though it will still be classified as Trump accounts. 

Planning Considerations 

A Trump Account can be a great jump-start on investing for the next generation. If ultimately used for retirement, these accounts have the potential to grow substantially before being accessed. They can also serve as a useful vehicle for relatives who want to contribute financially on behalf of a child. 

While it makes sense for every eligible beneficiary to claim the $1,000 seed funding, there may be better account options beyond that initial contribution. 

For example, a 529 plan may be more effective for education funding due to its flexibility and options for unused funds. If the goal is for the child to access money penalty-free at age 18, a UTMA or taxable brokerage account may make more sense. Additionally, if the child has earned income, contributing to a Roth IRA may be preferable to a Trump Account. 

As always, consult with a financial advisor to determine which accounts make the most sense for your specific situation. 

- Bill Rautiola, RICP®, AIF ®, PPC ® 

Sources: www.trumpaccounts.gov/ and www.irs.gov/trumpaccounts as of 2/6/2026. 

Prior to investing in a 529 Plan investors should consider whether the investor's or designated beneficiary's home state offers any state tax or other state benefits such as financial aid, scholarship funds, and protection from creditors that are only available for investments in such state's qualified tuition program. Withdrawals used for qualified expenses are federally tax free. Tax treatment at the state level may vary. Please consult with your tax advisor before investing.​ A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply. All investing involves risk including loss of principal. No strategy assures success or protects against loss. Please note that information regarding Section 530A (Trump) accounts is still evolving and is not final. To ensure you receive the most updated information, please refer to IRS.gov or Trumpaccounts.gov.