Entity Setup

Decoding Trump Accounts: Setting Up and Maximizing the New IRA for Kids

Trump Accounts are a new IRS-sanctioned IRA for eligible children under the One, Big, Beautiful Bill; here's how to open one, invest wisely, and claim the $1,000 pilot contribution.

By NomadicTax Research Team • 5-8 min read • August 29, 2026

## What Is a Trump Account? A Trump Account is a **child-benefit individual retirement account (IRA)** introduced under the **One, Big, Beautiful Bill (OBBB)**, effective for tax years **after December 31, 2025**. These special accounts are designed to give children a head start on long-term financial planning. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai)) ### Key Features - **Automated $1,000 pilot contribution** by Treasury for each eligible child born between **January 1, 2025** and **December 31, 2028** who isn’t already signed up. The eligibility requires prior Form 4547 election. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai)) - **Annual contribution limit** of $5,000 (indexed after 2027), including employer contributions (up to $2,500) and gifts from family or nonprofits. ([irs.gov](https://www.irs.gov/newsroom/working-families-tax-cuts?utm_source=openai)) - **Growth period restrictions** until the end of the year the child turns 17. Withdrawals generally not allowed during growth period; after that, account converts to treat like a traditional IRA. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-how-to-open-initial-trump-accounts-under-the-one-big-beautiful-bill?utm_source=openai)) - **Eligible investments during the growth period** are limited: mutual funds or ETFs that track a broad U.S. equity index, without leverage and with annual fees ≤ 0.10%. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-eligible-investments-for-trump-accounts-under-the-working-families-tax-cuts?utm_source=openai)) ## How to Set One Up 1. **File Form 4547, “Trump Account Election(s)”**, online or with your tax return—typically by December 31 the year the child is age 17 or younger. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-how-to-open-initial-trump-accounts-under-the-one-big-beautiful-bill?utm_source=openai)) 2. **Check eligibility**: child must be U.S. citizen born 2025-2028 for the $1,000 pilot; must have a valid Social Security number. ([irs.gov](https://www.irs.gov/irb/2026-13_IRB?utm_source=openai)) 3. **Select investments**, or let the trustee default to an eligible investment during growth period. Only eligible funds allowed until age 17. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-proposed-regulations-on-eligible-investments-for-trump-accounts-under-the-working-families-tax-cuts?utm_source=openai)) ## Strategic Tips for Use - Use the **pilot program enrollment** early so your child receives the $1,000 contribution. If you miss the pilot window, that benefit may be gone. - For employer contributions, ensure employer establishes a **Trump Account contribution program**; contributions up to $2,500 by employer are tax-excluded to employee. - Costs matter: stick to low-fee index funds (≤ 0.10%) to avoid disqualifying investments during growth period. - Maintain SSNs and comply with election deadlines—both are non-negotiable. ## Example Scenario **Case**: Parents of Emma (born June 2026) want to open a Trump Account and get her pilot program contribution. They file Form 4547 in 2026. Emma is eligible (born in 2026, a U.S. citizen, valid SSN). Treasury sends her $1,000. Over next several years, contributions flow—dad contributes $1,500; grandparents contribute $500. Investments stay in a low-cost S&P 500 ETF at 0.05% fee. At age 17, account becomes an IRA; Emma starts managing it independently. The total value has benefited from decades of compounded growth. ## State & Other Tax Considerations for Digital Nomads/Foreign Earners - If account holder moves or earns foreign income, **US federal tax rules still apply**, but investment earnings typically tax-deferred until withdrawal. - For nonresident aliens or dual-status situations: SSN and citizenship/nationality matter for eligibility; foreign tax credits and FBAR reporting still apply on foreign assets. ## Actionable Checklist - File **Form 4547** by end of calendar year child is under age 18. - Confirm employer offers Trump Account contributions if you want workplace benefits included. - Choose eligible, low-fee mutual fund or ETF. - Save all notices about state/local tax interactions—some states may conform; others may not. **Bottom line**: Trump Accounts are a radical new tool for long-term savings, even for childhood. Early setup, low fees, proper investment, and compliance can turn that pilot $1,000 into meaningful wealth over time.