They ‘re a new type of tax-advantaged savings account for young children who have a Social Security number and who are under the age of 18. Trump accounts were enacted under the “One Big Beautiful Bill.” They’re traditional IRAs, with some distinctions.
Parents must elect to open a Trump account. The Treasury Dept. will create an account for the child, which the parent will then be able to activate and open. To opt in, parents either file new Form 4547 or sign up through an online government portal. The Service has only released a draft Form 4547, and the portal won’t be ready until mid-2026.
The government will contribute $1,000 to each Trump account set up for children born after 2024 and before 2029. This is a one-time contribution, and parents must opt into it, using the same method as for opening the accounts. Up to $5,000 of additional money can be put in the account each year by parents or any other person until the child reaches age 18. Of this amount, up to $2,500 can be funded tax-free by an employer of the parent or beneficiary. The $5,000 figure will be adjusted each year after 2027 to account for inflation. Parents, relatives, etc. cannot deduct their contributions to Trump accounts. Certain qualified general contributions can be made by states, localities, the U.S. and 501(c)(3) tax-exempt groups for members of a class of beneficiaries. The government received a gift to put extra money into Trump accounts. Michael Dell, founder of Dell Technologies, and his wife, Susan, pledged $6.25 billion to fund Trump accounts for 25 million children up to age 10 who live in ZIP codes with a median income below $150,000. These kids will get $250 added to their accounts. Three more important points about contributions to Trump accounts: They are not taxable to the beneficiary. Qualified general contributions, payins by employers and the $1,000 payin by the U.S. don’t create basis in the accounts. Plus, contributions to Trump accounts cannot be made before July 4, 2026. Trump account funds can be invested only in certain stock mutual funds or exchange-traded funds that track an index of primarily U.S. companies, such as Standard & Poor’s 500-stock index, until the beneficiary reaches 18. Distributions generally can’t be taken while the beneficiary is younger than 18. Starting in the year the beneficiary turns 18, any distributions are taxed in a manner similar to rules that apply to withdrawals from traditional IRAs. For example, distributions of amounts that are allocable to basis aren’t taxed, while distributions of earnings are subject to income tax. Additionally, taxable payouts before age 59½ might be hit with a 10% penalty, but there are key exceptions to this. Also, a Trump account may be rolled over to a traditional IRA for the same beneficiary or certain other retirement accounts, in or after the year the beneficiary turns 18.