Trump Accounts explained: Eligibility, rules and planning considerations
- Trump Accounts are a new type of custodial, tax-deferred account designed to help U.S. children build long-term savings starting early in life.
- The program includes a $1,000 federal seed contribution for eligible children born between 2025 and 2028. However, the accounts are not limited to babies. Any child under 18 can have an account opened and funded by parents, relatives, employers or other contributors.
- Families need to understand the rules, including investment limitations, qualified uses and penalties for improper withdrawals. Funds are generally intended for education, a first home, starting a business or long-term retirement savings.
- For families with newborns, opening an account ensures they don’t leave federal money on the table. For older children, Trump Accounts offer tax-deferred growth over time.
U.S. parents have a new savings vehicle to help fund their children’s education and future expenses: Trump Accounts.
Created under the One Big Beautiful Bill, Trump Accounts allow parents or guardians to invest on a child’s behalf from birth until age 18. The funds can be used for a child’s education, a first home, starting a business or — if left untouched — long-term retirement savings.
The program includes a $1,000 federal seed contribution for eligible children born between 2025 and 2028. However, the accounts aren’t limited to newborns. Any child under 18 can have an account opened and funded by parents, relatives, employers or other contributors.
Like other tax-advantaged vehicles, Trump Accounts come with specific rules around contributions, investments and withdrawals — making it important for families to understand how they work, how they compare to existing options and how they fit into a broader savings strategy.
How Trump Accounts work: Mechanics, timing and tax basics
Trump Accounts are custodial accounts, meaning the account is owned by the child but managed by a parent or legal guardian until the child turns 18. Adults make contribution and investment decisions during those years.
Parents open an account by filing IRS Form 4547 with their 2025 federal tax return. This election triggers the IRS to create an account and, if the child qualifies, issue the $1,000 federal seed contribution. For families who don’t open an account through their tax return, an online portal is expected to be available by mid-2026.
Beyond the initial federal contribution, parents, relatives, employers and other permitted contributors can add funds, up to a combined annual limit of $5,000. Contributions are not tax-deductible, but investment growth is tax-advantaged, similar to an IRA. Investment options are limited and generally restricted to U.S.-based companies to encourage long-term, domestic investment.
How Trump Accounts compare to 529 plans and other savings options
Several savings vehicles for children already exist, including 529 plans, custodial Roth IRAs and Uniform Transfers to Minors Act (UTMA)/Uniform Gifts to Minors Act (UGMA) accounts. When families evaluate Trump Accounts against the alternatives, the most common comparison is a 529 college savings plan.
Like Trump Accounts, contributions to 529s are made with after-tax dollars. The difference comes at withdrawal. Qualified distributions from a 529 are completely tax-free at the federal level, and earnings are never taxed when used for eligible education expenses. In addition, most 529 plans offer broad investment choices and do not convert into taxable, retirement-style distributions later in life.
Trump Accounts, by contrast, are designed to support a wider range of future uses, beyond education. However, distributions taken after age 18 are generally taxed as ordinary income, and early and nonqualified withdrawals may be subject to penalties depending on timing and use.
Another important distinction is how contributions are treated for tax purposes. Contributions to Trump Accounts made by parents, family members and other private investors are not tax-deductible but do create “basis,” meaning that portion of a future distribution is not taxable. Contributions made by the federal government, employers or charitable organizations do not create basis, so those amounts — and any associated earnings — would generally be taxable upon distribution.
If the primary savings goal is education, a 529 plan may be the more tax-efficient option. The tradeoff is flexibility. Trump Accounts allow funds to be used for a broader set of future needs and, for qualifying families, include federal seed funding that other savings vehicles don’t offer.
There are other savings options to consider, too. Custodial Roth IRAs offer tax-free growth and withdrawals, but only if the child has earned income, which often limits who can use them and how early savings can begin. Since Trump Accounts don’t require earned income, families can begin saving from birth, though withdrawals are generally taxed as ordinary income when used.
UTMA and UGMA custodial accounts allow adults to hold assets for a child until they reach legal adulthood. These accounts are flexible and can be used for almost any purpose that benefits the child, but they don’t offer the same tax advantages as retirement-style accounts. Investment income may also be subject to the “kiddie tax.” Trump Accounts impose more structure and restrictions than UTMA and UGMA accounts in exchange for tax-advantaged growth.
Investment scope is another notable distinction. Trump Accounts are designed to invest only in U.S.-based companies, with choices similar to a limited 401(k) menu rather than an open brokerage account.
Who benefits from Trump Accounts
Trump Accounts are broadly accessible, but their value looks different depending on each family’s financial circumstances and goals.
For lower-income families, particularly those eligible for the seed contribution, the account can be a meaningful starting point. Families who may not otherwise be able to save for a child gain access to a funded, long-term investment vehicle from birth. Even without additional contributions, the $1,000 seed has the potential to grow over 18 years, creating a financial foundation that wouldn’t exist otherwise. Early funding and time can be powerful factors in a child’s future.
For higher-income families, the appeal is more about optionality. Trump Accounts allow families to begin tax-advantaged investing for a child before the child has earned income — something that isn’t possible with a Roth IRA. Annual contributions can supplement other savings vehicles, such as 529 plans or trusts, and provide flexibility around future use.
Bonus: Trump Accounts offer a built-in opportunity for financial education
Beyond the tax considerations, Trump Accounts offer a less obvious benefit that applies across income levels: They give families a practical way to introduce financial literacy early, without revealing household balances or broader wealth details.
The account itself can become a teaching tool. Parents can show a child how contributions grow over time, explain why funds are invested rather than spent and connect saving to future milestones, such as school or starting a business. Small contributions, such as a birthday or holiday gift, can reinforce the lesson without requiring large investments.
Are Trump Accounts risky?
As with any new tax program, some families may hesitate out of concern that rules could change over time or that the accounts are tied to a particular administration. That uncertainty is understandable. But in practice, for families with eligible newborns, inaction is the greater risk. Failing to open an account means leaving $1,000 of federal seed money unclaimed.
Historically, changes to tax law have affected future contributions rather than existing account. If future legislation were to limit or discontinue Trump Accounts, families would generally expect existing accounts to remain usable under the rules in place at the time they were established.
That makes Trump Accounts relatively low risk when used as intended. The accounts come with clear rules around permitted uses; withdrawals that don’t meet those requirements can trigger penalties and repayment obligations. Families should be mindful of the account’s limitations and use it only for its intended purposes.
How Wipfli can help
Need help navigating new savings tools? Wipfli’s private client services team helps individuals and families understand how vehicles like Trump Accounts fit into broader tax, investment and wealth planning strategies. Learn more about how Wipfli can tailor a plan that aligns with your family’s goals and priorities, then contact us to start a discussion.
