Trump Accounts: What Parents and Families Need to Know
In mid 2025, sweeping tax legislation—often referred to as the “One Big Beautiful Bill”—introduced a new type of custodial retirement-style account commonly referred to as a Trump Account. While the name has generated attention, the real “significance” lies in how these accounts function and the long-term planning opportunities they may provide for families.
This article breaks down how Trump Accounts work, who qualifies, and what tax considerations parents and guardians should understand. This new account isn’t a complete game-changer or benefit but it is a small opportunity we can take advantage of for our children.
What Is a Trump Account?
A Trump Account is a tax-advantaged account designed specifically for children under the age of 18. From a tax standpoint, it is generally treated similarly to a traditional IRA, but with unique contribution and eligibility rules tailored for minors.
The account is intended to provide children with a financial foundation that can grow over time and eventually transition into a more traditional retirement vehicle.
Who Can Open and Contribute?
Trump Accounts may be opened on behalf of a child by:
- Parents
- Legal guardians
- Grandparents
- Certain employers of the child’s parent or guardian
Annual contributions are capped at a combined maximum of $5,000 per year, regardless of the number of contributors. Contributions can come from multiple sources but cannot exceed the annual limit.
Importantly, contributions are made after-tax, meaning they do not provide an immediate tax deduction but establish basis in the account.
Government and Private Contributions
Automatic $1,000 Contribution
Children born between 2025 and 2028 may qualify for an automatic $1,000 government contribution, provided the parents opt in. This contribution does not require matching funds from the family.
Additional Private Funding Opportunity
Children under the age of 11 who live in ZIP codes with a median household income below $150,000 may qualify for an additional $250 contribution, funded through a $6.25 billion private pledge made by Michael and Susan Dell.
For many families, these contributions represent “free money,” making participation worthwhile even if the account is not actively funded beyond the initial deposits.
Withdrawal Rules and Penalties
Trump Accounts are subject to strict withdrawal rules:
- No withdrawals are permitted before age 18
- Withdrawals of earnings before age 59½ are subject to:
- Ordinary income tax, and
- A 10% early withdrawal penalty
However, basis—the amount contributed by parents or grandparents—may be withdrawn tax-free. Current guidance suggests that government contributions and possibly employer contributions may not count as basis, though future regulatory clarification may adjust this treatment.
Conversion to a Traditional IRA
Once the child reaches age 18, they may convert their Trump Account into a traditional IRA, allowing continued tax-deferred growth under standard retirement account rules.
Contribution Deadline and Availability
- Contributions to Trump Accounts will only be permitted through July 4, 2026
- As of now, accounts cannot yet be opened, but implementation is expected later in 2026
- Financial institutions are anticipated to roll out setup options once administrative guidance is finalized
Planning Considerations
From a tax planning perspective, Trump Accounts may serve as:
- A long-term savings vehicle for children
- A tool to introduce early retirement planning
- A supplemental asset that can later integrate into traditional retirement strategies
Families should weigh contribution strategies carefully, particularly with respect to basis tracking, future conversion planning, and the potential impact on financial aid or other benefits.
Final Thoughts
Trump Accounts represent a new and evolving area of tax-advantaged planning for families. While the program is not yet fully operational, understanding the rules now allows parents and guardians to prepare and act once accounts become available.
As with any tax-related strategy, families should consult a qualified tax professional or financial advisor to ensure the account aligns with their broader financial goals and complies with evolving IRS guidance.