The passage of the One Big Beautiful Bill (OBBB) introduced a new tax savings vehicle — Trump Accounts — for children under 18. Beginning July 4, 2026, families, employers and even certain government or nonprofit organizations can contribute to these accounts on behalf of eligible children.
While the concept is simple, it’s important to understand the rules surrounding contributions, limits and tax treatment. Here’s an overview of how Trump Account contributions work, and what should be considered.
A Trump Account is a special type of individual retirement account (IRA) created specifically for a child’s benefit. It can be opened for an eligible child under the age of 18 who has a Social Security number. The account may be opened by the Secretary of the Treasury or by an authorized individual, such as a parent or guardian.
During the child’s minority — referred to as the growth period — the account is subject to special contribution and investment restrictions. Once the beneficiary turns 18, the account generally begins following many of the rules that apply to traditional IRAs.
Trump Accounts allow contributions from more sources than many other savings vehicles. During the growth period, funds may come from:
As part of the pilot program, a one-time $1,000 contribution is made for eligible children born between 2025 and 2028, who are U.S. citizens and have a Social Security number.
Employers can contribute up to $2,500 per year per employee (adjusted for inflation after 2027), provided the employer has established a Trump Account contribution program.
These entities can make “qualified general contributions” to groups of eligible children, with no annual dollar limit, assuming the contribution is made to a qualified class (e.g., all children in a state or all children born in a certain year).
Parents, relatives and even the child may contribute, subject to the annual limit contribution limits highlighted below.
For 2026 and 2027, total contributions from all sources (except for exempt contributions) are $5,000 per beneficiary per year. The amount will be adjusted for inflation after 2027.
Employer contributions are capped at $2,500 per employee per year, regardless of how many children the employee has. This contribution will also be also indexed for inflation after 2027.
Certain contributions are excluded from the $5,000 cap, including:
The $1,000 federal pilot program deposit
Qualified general contributions from governments or charities
Qualified rollover contributions
If a parent contributes $3,000 and the employer contributes $2,000 for a child in 2026, the $5,000 annual limit is met. If the child also receives a $1,000 federal pilot program deposit, that amount is exempt and does not count toward the $5,000 cap.
Timing: Contributions cannot be made before July 4, 2026
Process: Contributions are made in cash (not property or securities)
Trustee: Funds must be deposited with a bank or IRS-approved nonbank trustee
Reporting: Trustees are required to track and report the source and amount of each contribution, especially for contributions over $25 from non-family sources
Understanding how contributions are taxed is crucial for planning purposes:
Individual contributions (from parents, relatives or the child) are not deductible for federal income tax purposes
Employer contributions (up to $2,500 per employee) are excluded from the employee’s gross income and are not subject to income or payroll tax
Federal and qualified general contributions are not included in the beneficiary’s income and do not create basis in the account
Other contributions from parents, the child or others do create basis in the account, which is important for determining the taxable portion of future distributions
Trump Accounts are subject to strict investment rules before the child turns 18. Investments are limited to:
Mutual funds or ETFs that track a broad U.S. equity index (like the S&P 500)
No leverage or sector-specific strategies
Maximum annual fees of 0.1% of the balance
No ESG-focused or concentrated investment funds
Once the beneficiary turns 18, the Trump Account generally begins operating like a traditional IRA:
New contributions require earned income
Investment choices expand
Distributions before age 59½ are subject to income tax and a 10% penalty unless an exception applies (such as for higher education expenses or a first-time home purchase)
Contribution limits are capped at $5,000 per year, per child (excluding exempt contributions)
Employers can contribute up to $2,500 per employee each year
Individual contributions are not deductible — only employer contributions are tax-free to the employee
Only low-fee, broad-based U.S. equity index funds are allowed during the growth period
A one-time $1,000 federal deposit may be available for eligible children born 2025–2028, but it must be claimed
After the age of 18, the account follows traditional IRA rules with some special restrictions
Trump Accounts offer a new way to save for a child’s future, but they come with unique tax and contribution rules. While they add complexity to the savings landscape, the initial government deposit and employer contributions may provide a meaningful boost for some families. As with any savings vehicle, it’s important to understand the rules and coordinate contributions to maximize the benefit. Because Trump Accounts are a newly created savings vehicle, additional Treasury and IRS guidance may continue to clarify operational and reporting requirements as implementation approaches.
Need help evaluating whether a Trump Account makes sense for your family or organization? Contact us here or call us at 800.899.4623.