One of the more unusual provisions in the One Big Beautiful Bill (OBBB), signed into law in July 2025, is the creation of a brand-new savings vehicle for children: the Trump Account. Part baby bond, part IRA, part forced index fund investment — it's unlike anything in the existing tax code.
If you have a child born between 2025 and 2028, or you know someone who does, here's exactly how these accounts work.
Who's Eligible
Trump Accounts are available to US citizens born between January 1, 2025 and December 31, 2028 with a valid Social Security number. That's a four-year window. Children born before or after those dates are not eligible.
Each eligible child gets one account — no more. If parents accidentally open a second one, it will need to be closed or consolidated.
How to Open an Account
A parent or legal guardian opens the account by filing IRS Form 4547 (a new form created specifically for this program). The account must be opened by December 31 of the child's 17th birthday, so there's a wide window — but earlier is obviously better for compounding.
The account is held at a qualifying financial institution.
The $1,000 Government Seed
An eligible child receives a one-time $1,000 pilot program contribution from the US Treasury. It is not automatic: an authorized individual has to make the election on Form 4547. It does not count toward the annual contribution limit, and it does not depend on family income.
The seed is deposited after the election is processed, and no earlier than July 4, 2026.
Contribution Rules
The contribution rules are unusually tight for a savings account:
| Rule | Details |
|---|
| Annual limit | $5,000 per year |
| Indexing | Limit indexed for inflation starting after 2027 |
| First contributions allowed | July 4, 2026 |
| Who can contribute | Parents, guardians, grandparents, other family, friends, employers |
| Employer contributions | Up to $2,500/year excluded from the employee's taxable income |
The employer contribution rule is notable. If your employer offers this as a benefit, up to $2,500 per year contributed to your child's Trump Account is not taxable income to you. It's essentially free money that doesn't show up on your W-2 — similar in concept to employer HSA contributions.
Anyone can contribute — there's no requirement that contributors be related to the child. Grandparents, family friends, and even employers can all put money in, as long as the total doesn't exceed $5,000 per year.
Investment Rules: Index Funds Only
This is where Trump Accounts diverge sharply from 529 plans and custodial accounts. The investment options are strictly limited to funds tracking the S&P 500 or another broad index of US equities, with expense ratios no higher than 0.10%.
In practice, this means funds tracking indexes like the S&P 500, the total US stock market, or similar broad benchmarks. Think:
- Vanguard S&P 500 ETF (VOO) — 0.03% expense ratio
- Schwab Total Stock Market Index (SWTSX) — 0.03% expense ratio
- Fidelity 500 Index (FXAIX) — 0.015% expense ratio
There's no option to pick individual stocks, invest in bonds, or use target-date funds. The rationale: force long-term equity exposure for a multi-decade time horizon, and prevent high-fee products from eating into returns.
Withdrawal Rules
Trump Accounts are locked until the child turns 18. There are only two exceptions before that age:
- Rollover to another Trump Account — if you need to change custodians
- Rollover to an ABLE account — available starting at age 17 for children with qualifying disabilities
After the child turns 18, the account functions like a traditional IRA — which is what it is in law. That means:
- Withdrawals are taxed as ordinary income
- Early withdrawal penalties apply before age 59½ (with standard IRA exceptions)
- The account can be rolled into a traditional IRA or potentially converted to a Roth IRA (with taxes owed on the conversion)
Growth Projections
The power of these accounts is compounding over 18 years with mandatory equity exposure. Here's what a Trump Account could look like at age 18 under different scenarios:
| Scenario | Annual Contribution | Government Seed | Assumed Annual Return | Balance at Age 18 |
|---|
| Maximum contributions, strong returns | $5,000/year | $1,000 | 10% | ~$236,000 |
| Maximum contributions, average returns | $5,000/year | $1,000 | 7% | ~$191,000 |
| Half contributions, average returns | $2,500/year | $1,000 | 7% | ~$96,000 |
| Seed only, average returns | $0/year | $1,000 | 7% | ~$3,380 |
| Maximum contributions, exceptional returns | $5,000/year | $1,000 | 12% | ~$676,000 |
Even at modest contribution levels, the combination of early start, equity-only investing, and an 18-year lockup creates significant wealth. The seed-only scenario shows that even doing nothing beyond opening the account produces meaningful growth.
How Trump Accounts Compare to Other Options
| Feature | Trump Account | 529 Plan | Roth IRA | Custodial (UTMA/UGMA) |
|---|
| Government seed | $1,000 | No | No | No |
| Annual limit | $5,000 | ~$18,000 (gift tax) | $7,000 | ~$18,000 (gift tax) |
| Investment options | US index funds only | Varies by plan | Broad | Broad |
| Tax-free growth | Yes (until withdrawal) | Yes (for education) | Yes (qualified) | No (kiddie tax) |
| Withdrawal restrictions | Locked until 18, then IRA rules | Education expenses | Age 59½ (contributions anytime) | Minor's age of majority |
| Income limits | None | None | Yes ($161K single / $240K MFJ) | None |
| Use restrictions | None after 18 (IRA rules) | Education only | None (qualified) | None |
The biggest advantages of Trump Accounts: no income limits, a free $1,000 to start, and no restrictions on what the money can eventually be used for (unlike 529s). The biggest disadvantage: very limited investment choices and no access until 18.
Key Dates to Remember
- Now: File Form 4547 to open an account for eligible children
- July 4, 2026: First date contributions can be made; Treasury seed deposits begin
- After 2027: Annual contribution limit begins indexing for inflation
- December 31, 2028: Last date an eligible child can be born
- Child's 17th birthday year-end: Deadline to open an account
Practical Tips
Open the account early, even if you can't contribute right away. The $1,000 seed starts compounding as soon as it's deposited.
Set up automatic contributions once they're allowed in July 2026. Even $100/month ($1,200/year) adds up significantly over 18 years.
Ask grandparents to contribute instead of buying toys. A $500 birthday gift invested in a Trump Account at age 1 could be worth $3,000-$5,000 by age 18.
Check if your employer offers contributions. The tax-free $2,500 employer contribution is a powerful benefit — if your company offers it, that's essentially a raise.
This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional for guidance specific to your situation.