Trump Accounts Are Open: What Parents and Grandparents Should Know

What is a Trump account?

Created under the One Big Beautiful Bill Act and codified as new Section 530A, a Trump account is a special type of traditional IRA established for a child. Any child under 18 with a Social Security number is eligible — there are no income limits, and the child doesn't need earned income. Accounts can be opened through TrumpAccounts.gov or by filing Form 4547, and contributions officially opened on July 4, 2026.

The $1,000 federal seed contribution

Children who are U.S. citizens born between January 1, 2025 and December 31, 2028 qualify for a one-time $1,000 federal pilot contribution once an account is opened on their behalf. This seed money does not count against the annual contribution limit — it's on top of whatever the family contributes.

Contribution rules

Anyone — parents, grandparents, other relatives, even family friends — can contribute to a child's account, up to an aggregate limit of $5,000 per year per child (indexed for inflation after 2027). Contributions must be cash, must be made by December 31 of the year (no April 15 grace period like a regular IRA), and are not tax-deductible.

Employers can also contribute up to $2,500 per year to accounts of an employee's dependents through a formal Trump account contribution program. Employer contributions count toward the $5,000 cap but are excluded from the employee's taxable income — a genuine fringe benefit worth asking about.

Investment restrictions

During the growth period — from account opening until January 1 of the year the child turns 18 — funds must be invested in low-cost index funds tracking the S&P 500 or other broad U.S. equity indexes, with fund fees capped at 0.10%. No individual stocks, no bonds, no sector funds.

The lockup — and what happens at 18

Here's the part families need to understand clearly: money in a Trump account generally cannot be withdrawn during the growth period. There are no hardship exceptions. Then, on January 1 of the year the child turns 18, the account automatically converts into a regular traditional IRA under the child's full control.

The tax treatment nobody talks about

Distributions after age 18 follow traditional IRA rules — ordinary income tax on amounts above basis, plus a potential 10% early withdrawal penalty before age 59½ unless an exception applies (qualified education expenses and first-home purchases are among the exceptions). The family's own after-tax contributions create basis and come out tax-free, but the $1,000 federal seed, employer contributions, and any charitable contributions do not create basis — those amounts, plus all the growth, are fully taxable when withdrawn.

That makes basis tracking across contribution sources genuinely important — a record-keeping obligation that starts now and matters for decades.

Bottom line

For families with children born 2025–2028, opening an account to claim the $1,000 seed is close to a no-brainer. Beyond that, the decision is more nuanced — the lockup, the ordinary-income treatment of growth, and coordination with 529 plans all deserve real analysis. And if you're contributing to accounts for children or grandchildren, there's a gift tax wrinkle you should know about — we cover it in a companion post on the gift tax rules.