Trump Accounts: A Practical Guide for Parents
Key Takeaways
Trump Accounts are a new investment option for minors, promoting an early start to retirement savings.
Created under federal law in 2025, they create unique tax planning opportunities for both business owners and employees.
A one-time $1,000 government seed contribution is planned for American children born between January 1, 2025, and December 31, 2028. Additional contributions may come from individuals, employers, and charities.
Generally, no withdrawals can be made before age 18; after that, traditional IRA rules apply.
Investments are limited to low-cost index mutual funds or ETFs, with a 0.10% (10 basis points) expense cap and no leverage.
What are “Trump Accounts”?
In simple terms, a Trump Account is a starter retirement/investing account for kids that grows tax-deferred until adulthood.
They are similar to a traditional IRA, but with rules restricting early access to the money while the child is under 18. After the child turns 18, the account is treated like a normal IRA-type account.
Who is eligible to open an account?
Any child with a Social Security number who is under age 18 at the end of the year the account is established.
What benefit do they provide?
There are three core benefits for account holders:
Tax-deferred growth - There are no tax implications until money is distributed from the account (typically in retirement).
Free money from the government - There is a one-time $1,000 contribution for US-citizen children born between 1/1/2025 - 12/31/2028.
Employer-funded contributions are not taxable - Your employer can contribute up to $2,500 per year to the account, without it being taxable to the employee. These contributions are deductible to employers as well.
Here’s how Trump Accounts compare against similar investing alternatives (529 plans and UTMA accounts):
| Feature | Trump Account | 529 Plan | Custodial (UTMA) |
|---|---|---|---|
| Deduction for contributions | No | No (Yes for some states) | No |
| Tax on growth | Deferred | Tax-free for education | Taxable yearly |
| Access before 18 | No | Yes (for education) | Yes |
| Investment flexibility | Limited index funds | Broad | Broad |
How do you open a Trump Account?
The recommended approach is to have your CPA file Form 4547 (Trump Account Election) with your tax return.
If you’ve already filed your taxes, you can mail Form 4547 at any point during the year to open the account. The mailing address is listed on the IRS.gov website here. Make sure to choose your state, and mail to the 1040 “Not enclosing a payment” address.
These accounts will initially be created and held with a financial agent that the IRS chooses. You’ll likely be able to transfer these accounts to your preferred brokerage (e.g. Schwab) at a later date.
Note that these accounts can not be funded until July 4, 2026.
How much can you contribute to a Trump Account?
The annual contribution limits are:
Parent/Family contributions - Up to $5,000 per year for each beneficiary. There is no deduction for these contributions.
Employer contributions - Up to $2,500 per year per employee. This contribution goes towards the $5,000 annual cap, and employees can split the contributions between their own beneficiaries.
Charitable organizations - No limit to how much a 501(c)(3) can contribute.
Federal seed contribution - The $1k federal seed does not count towards the $5,000 limit.
Example:
Mom, Dad, and Grandparents can contribute a combined $5,000 for each beneficiary.
If Mom’s employer already contributed $2,500 to a beneficiary, then the family can only contribute another $2,500.
If you have two children, your employer can contribute up to $2,500 ($1,250 to each child). The family can contribute another $3,750 to each of them.
When can money be taken out of a Trump Account?
Before the beneficiary turns 18
There’s almost no way to take funds out of the account.
Between ages 18 - 59
Money can be withdrawn but is subject to tax AND a 10% penalty. The penalty is waived if you meet certain exceptions for early withdrawals:
Qualified education expenses
First-time home purchase (up to $10k)
Certain medical expenses (birth/adoption/health insurance while unemployed)
After age 59 1/2
Money can be withdrawn but is subject to tax. However, there’s no penalty at this age.
Note that after 18, any individual/family contributions are not taxable when distributed.
Tax planning strategies for Trump Accounts
Should you open a Trump Account? Here’s how we’re thinking about it for clients:
Smart Uses of a Trump Account
Qualify for the free $1,000 seed program
Stack with 529 contributions
Give your kid an early start on retirement
Capture employer contributions if offered
Business owners who employ themselves (e.g. S corps) can make tax-deductible contributions
Not Ideal Uses
Funding college
Emergency savings
Short-term goals
It’s more of a “set it and forget it” compounding account than a spending account
