What are Trump Accounts?
“Trump Accounts” are a new tax‐advantaged savings vehicle introduced by the One, Big, Beautiful Bill (OBBB). They function as a type of traditional IRA for children under age 18 with special rules during a “growth period.” (irs.gov)
Key features:
- Eligible individuals are children who have not attained age 18 by the end of the year, with a Social Security number. (irs.gov)
- Funds cannot be withdrawn during the growth period—except in limited cases (rollovers, ABLE rollovers, excess contributions, or death). (irs.gov)
- A one‐time $1,000 pilot contribution from the government is available for children born in 2025-2028. (irs.gov)
Investment restrictions during growth period
- Only eligible investments are allowed. These are typically mutual funds or ETFs that track a qualified U.S. equity index without leverage, and with fees under 0.1%. (irs.gov)
- Money market funds and holding cash are mostly off limits, except temporarily as part of transitions (e.g. after a fund sale). (irs.gov)
Contribution and limit rules
- All contributions from employers under section 128 and other sources count toward a $5,000 annual aggregate limit (subject to cost-of-living adjustments after 2027). (irs.gov)
- Pilot government contribution does not count towards that $5,000 limit. (irs.gov)
How parents and guardians interact with Trump Accounts
- Authorized individuals such as legal guardians, parents, adult siblings, or grandparents may make the election to open an initial Trump Account using Form 4547. (irs.gov)
- The one making the election becomes the responsible party until the child reaches legal capacity. They handle investment election, rollovers, and successor party designations. (irs.gov)
Example
A parent elects a Trump Account for their child born in 2025. They choose eligible investments (a low-fee S&P-500 ETF), applying for the pilot program contribution of $1,000, while ensuring their own funds contributed do not exceed $5,000 in total aggregate for 2026. They also appoint themselves as responsible party. The child at age 18 then can begin managing as a traditional IRA under standard IRA rules.
Key takeaways
- Trump Accounts offer new ways to build savings and wealth for children, with tax benefits and constraints.
- They come with strict rules—investment eligibility, contribution caps, no withdrawals during growth.
- Parent or guardian involvement is central—making elections, choosing investments, keeping track of pilot contributions.
— Bottom line: If you have a child eligible for a Trump Account, electing early and choosing your contributions and investments wisely could yield long-term benefits.