Trump Accounts: A New Way to Save for Your Child’s Future

Parents and grandparents already juggle 529 plans, custodial accounts, and FAFSA rules. The recently signed reconciliation law adds “Trump Accounts” as a permanent, tax-deferred savings vehicle, and the IRS just released 44 pages of guidance explaining how they’ll work. Here’s what families and advisers need to know.

What is a Trump Account?

A Trump Account is a federally established investment account designed to give children a financial head start. The U.S. Treasury seeds the account with $1,000 for every child born between 2025 and 2028, and the money grows tax-deferred in low-cost U.S. stock index funds until the child turns 18.

The IRS calls the period before a child turns 18 the “growth period.” During this time, the account is managed by an “authorized individual,” typically a parent or legal guardian, who can select among eligible investments and make additional contributions.

How do I open a Trump Account?

To open a Trump Account and claim the $1,000 seed deposit, you’ll need to file IRS Form 4547 with your 2025 tax return or register online at trumpaccounts.gov. The IRS will begin sending account activation information in May 2026, with accounts going live on July 5, 2026.

If multiple people could open an account for the same child, the IRS follows a priority order: legal guardian first, then parent, adult sibling, and finally grandparent. Once someone makes the election, no one else can open a duplicate account for that child.

How much can you contribute to a Trump Account?

Trump Accounts have three separate contribution channels, each with its own limit:

The most surprising detail from the IRS guidance: employer contributions can be made through a Section 125 cafeteria plan, allowing employees to contribute up to $2,500 pre-tax to a dependent child’s Trump Account. This effectively creates a new pre-tax savings vehicle for families, similar to a dependent care FSA but for long-term investment.

What about corporate and philanthropic gifts?

Charitable organizations and government entities can make “general funding contributions” that don’t count against the $5,000 family limit.

Michael and Susan Dell have already announced $6.25 billion in contributions, $250 per account for children age 10 and under in zip codes with average household income of $150,000 or less.

Other major companies including Uber, Mastercard, BlackRock, and Visa have also committed to participate.

How are Trump Accounts invested?

During the growth period, Trump Account funds must be invested in a mutual fund or ETF that tracks a qualified index of primarily U.S. companies. The IRS requires these funds to have annual fees of 0.1% (10 basis points) or less and prohibits the use of leverage.

According to the official trumpaccounts.gov website, the account displays holdings in individual American companies like Nvidia, Caterpillar, Home Depot, and Tesla, suggesting the underlying fund tracks a broad U.S. stock index.

The IRS guidance notes that a Trump Account may offer more than one eligible investment meeting these requirements.

How much could a Trump Account grow?

The official Trump Accounts website provides growth projections based on historical S&P 500 averages:

These estimates assume an account opened at birth with the $1,000 seed deposit. Actual results will vary and are not guaranteed.

How do Trump Accounts compare to 529 plans?

Both accounts help families save for a child’s future, but they work differently. Trump Accounts offer more flexibility in how funds can be used, while 529 plans provide completely tax-free growth when used for qualified education expenses.

If college is your only goal, a 529 still wins for tax-free withdrawals. But if you want flexible options, like a down payment or career training, Trump Accounts add a powerful supplement. Many families may benefit from using both.

What happens when my child turns 18?

At the end of the growth period, the Trump Account becomes the child’s property and follows traditional IRA rules. The account beneficiary has several options:

• Keep the Trump Account: Continue letting it grow, though investment restrictions loosen after the growth period.
• Convert to a Roth IRA: Pay income tax on the balance at their current (likely low) tax rate, then enjoy tax-free growth going forward. This is expected to be a popular strategy.
• Roll over to a traditional IRA: The account agreement can even provide for automatic transfer to a traditional IRA at age 18.
• Roll over to an employer plan: Transfer to a 401(k), 403(b), or governmental 457(b) plan, but only if the Trump Account has no after-tax basis.
• Take distributions: Use funds for education, a first home, or any purpose, subject to ordinary income tax and potentially a 10% early withdrawal penalty if taken before age 59½ and no exception applies.

Can I transfer to an ABLE account?

Yes, but only during the calendar year the account beneficiary turns 17. After age 18, rollovers to ABLE accounts are no longer permitted.

What are the pros and cons of Trump Accounts?

Before you rush to open yet another account, consider both the benefits and the trade-offs.

Potential benefits

• Free money: The $1,000 government seed deposit is essentially free, no strings attached beyond opening the account.
• Pre-tax contributions: The ability to contribute $2,500 pre-tax through an employer cafeteria plan is a genuinely valuable tax benefit.
• Ultra-low fees: The 0.1% fee cap ensures more of the growth stays in the account.
• Built-in flexibility: Unlike 529 plans, funds can be used for workforce training or a first home, not just higher education.
• Roth conversion opportunity: At 18, the child can convert to a Roth IRA at what’s likely a very low tax rate, then enjoy tax-free growth for decades.
• Philanthropic support: Corporate and charitable contributions can significantly boost the account beyond what families could save alone.

Potential drawbacks

• Limited investment options: U.S. stock index funds only during the growth period, no bonds or international diversification.
• No tax-free withdrawals: Unlike 529 plans, distributions are taxed as ordinary income.
• Annual cap limits impact: $5,000 per year (plus $2,500 employer) won’t close a six-figure tuition gap on its own.
• Potential FAFSA impact: Trump Accounts will likely be treated as student assets on the FAFSA, similar to UGMA/UTMA accounts, and assessed at a higher rate than parent-owned 529 assets, which could reduce need-based aid.
• Complexity: Multiple contribution channels and rules add another account to track alongside 529s and other savings.

What should families do now?

With Trump Accounts launching July 5, 2026, here are your next steps:

1. Sign up for updates at trumpaccounts.gov.
2. Prepare to file Form 4547 with your 2025 tax return. If you have a child born in 2025–2028, this is how you’ll claim the $1,000 seed deposit.
3. Ask your employer about cafeteria plan options. If your company offers a Section 125 plan, the $2,500 pre-tax contribution could be a valuable benefit.
4. Watch for state conformity. Some states piggyback on federal definitions, while others write their own rules, affecting state tax treatment.
5. Don’t abandon your 529. Trump Accounts complement 529 plans but don’t replace them, especially for families prioritizing tax-free education withdrawals.

Bottom Line

Trump Accounts won’t replace 529 plans, but they offer something new: a government-seeded, low-cost investment account with flexibility for education, workforce training, or a first home, plus a potential pre-tax contribution option through employers.

For families with children born 2025–2028, opening an account to claim the $1,000 seed deposit is a no-brainer. The bigger question is how to use Trump Accounts strategically alongside your existing 529 plans and other savings.

Frequently Asked Questions