There are many ways that parents and grandparents can use the power of compounding growth to help their child or grandchild save money before they are even old enough to understand what investments are. We’re familiar with some of these savings vehicles, like 529 plans to help children save for education expenses, or UTMA accounts for more flexibility in how children can spend these gifted funds. But as of July 4th, 2026, another way of setting up an account specifically for the benefit of a child will become available. These are called Trump Accounts.
What are Trump Accounts?
Trump Accounts are a form of traditional individual retirement account (IRA) that can be set up for the benefit of an eligible child. According to current IRS guidance, the child must have a valid Social Security number and must not have turned age 18 before the end of the calendar year in which the election is made. Trump Accounts differ from IRAs (and Roth IRAs) because of their contribution rules. For traditional and Roth IRAs, you are only able to contribute up to the lesser of the amount of earned income reported in a calendar year by an individual or a maximum of $7,500 (in 2026). Trump Accounts, by contrast, do not have the same income requirements, making way for contributions into these retirement accounts before children have the ability to earn income.
How Do Contributions Work?
Contributions made by individuals are treated the same as non-deductible traditional IRA contributions – there is no tax benefit of making the contribution. Contributions are limited to $5,000 (for 2026) per year and can come from a variety of sources such as parents, grandparents, employers (limit $2,500 for 2026), and some government and 501(c)(3) entities in certain situations.
In tandem with the announcement of the Trump Account, a federal program was established whereby eligible children with Trump Accounts who are also born between the years of 2025-2028 are eligible to receive a one-time $1,000 credit paid into the child’s Trump Account. An important note: This contribution is not automatic. An eligible individual must make the election using IRS Form 4547.
How are Distributions Taxed?
It is important to note that there are no distributions allowed during the growth period (before age 18). After that point, these accounts abide by IRA distribution rules.
Any non-deductible contributions made by individuals into the Trump Account will not themselves be taxed again at distribution. However, any growth associated with those contributions will be considered taxable income at the time of distribution to the beneficiary (the same as a Traditional IRA).
Any tax-advantaged or otherwise qualified contributions, including contributions from employers, 501(c)(3) organizations, and the one-time $1,000 credit will also be considered taxable when distributed.
How Are Trump Accounts Invested?
These accounts will have a strong focus on US-based equities (stocks) that are intended for long-term growth. Eligible investments will include ETFs and mutual funds that track the S&P500 index or another index that is invested in “primarily (90%+) United States companies.”
Nonqualifying investments include individual stocks, bonds, and indexes tracking primarily foreign companies. Families should understand that stock-based investments can fluctuate in value, and there is no guarantee that the account will increase in value over any specific period of time.
How Do Trump Accounts Compare to 529 Plans and UTMA Accounts?
Trump Accounts primarily differ from other child-specific savings vehicles in that these are retirement-focused accounts. In contrast to a 529 Plan, which receives special tax treatment only when funds are used for qualified education expenses, the funds in a Trump Account can be used for any expenses of the beneficiary’s choosing, provided that they have met the same withdrawal guidelines of a Traditional IRA (age 59.5).
This feature of having flexibility in spending is more similar to an UTMA. An UTMA, however, does not have the same tax advantages that a Trump Account (IRA) has – meaning that it must pay capital gains tax and annual tax on any income generated by the account. Both an UTMA and a Trump Account become legally-owned by the child once they’ve reached the age of majority.
| 529 Plans | |
| ProsTax Advantages: while contributions to a 529 Plan are not federally tax deductible*, growth and qualified withdrawals are generally tax-free *Some states will offer tax deductions for 529 contributionsCoverage for Education: qualified education expenses including tuition, books, and room and boardAccount Control: parents can retain control of the 529 through a child’s college years and beyond | ConsLack of flexibility: if funds are not used for qualified educational expenses, withdrawals generally become taxable and are penalized 10%Limited investment options: 529 plans generally are limited to investments in mutual funds, ETFs, or other options offered by the plan, which can come with additional built-in costs |
| UTMA Accounts | |
| ProsFlexibility of use: funds are allowed to be used generally for the child’s benefit, subject to custodial restrictionsPortability of funds: if you are able to save more than what will be spent on college, a child has the freedom to use these funds once they’ve reached the age of majorityInvestment Flexibility: UTMA accounts allow for the purchase of individual securities, as well as real estate, depending on the custodian. | ConsControl at age of majority: once a child reaches the age of majority (dependent on the state), those assets legally belong to the childTaxation: unearned income in an UTMA may be subject to “kiddie tax” rules if it exceeds applicable thresholdsFinancial aid impact: UTMA assets are generally treated as student assets for financial aid purposes, which can have a greater impact than parent-owned assets. |
| Trump Accounts | |
| ProsFlexibility of use: Funds may be available for a variety of uses once the beneficiary is eligible to take distributions under IRA rules, but withdrawals may be taxable and may be subject to penalties depending on the circumstances.Conversion into IRA: Once a child reaches the age of majority, these accounts will become IRAs in their own name where they can then invest, contribute, and possibly convert funds the same way that you would into a Traditional or Roth IRAInvestment Flexibility: Once an IRA, fund are able to be invested in individual securities, depending on the custodian. | ConsGrowth taxed at ordinary income rates: Earnings and taxable distributions are generally taxed as ordinary income, while nondeductible contribution basis is not taxed again if properly tracked and reportedLimited use pre-retirement: Distributions may be restricted before age 18, and withdrawals before age 59½ may be taxable and may be subject to penalties unless an exception applies. |
How Do I Know If My Child or Grandchild Should Have A Trump Account?
As with any comprehensive saving approach, the method by which you plan to save for your child depends upon a child’s and/or parent’s desire for how the funds are to be used. When considering establishing a Trump Account, you should ask yourself a few questions about why and what specifically you’re saving for. If it’s specifically for college education expenses, a 529 may be a better fit. If you’d like to give your child better access to funding for large life expenses early in adulthood (like a wedding, a new car, etc.), an UTMA may be more appropriate. If you’re looking to help your child get a head-start on their long-term retirement saving, Trump Accounts can be a great tool!
At a minimum, if you’ve had an eligible child (or grandchild) born between 2025 and 2028, it is worth taking advantage of the $1,000 credit the federal government is offering to deposit into these accounts.
How Do I Set Up A Trump Account?
Taxpayers were able to File Form 4547 for the first time with their 2025 tax return. If you’ve already done that, you should have already received communication regarding having your account established. If not, you can go to trumpaccounts.gov and follow the information on the homepage to fill out Form 4547. This form is used to elect to open the initial Trump Account and, if applicable, request the $1000 pilot program contribution.
Since the rules are new and additional guidance may continue to develop, families should review current IRS instructions and consult with a qualified tax or financial professional before making a decision.
Final Thoughts
If you’ve considered setting aside funds to help your child or grandchild be better financially prepared for life as an adult, you’ve already taken the important first step in setting them up for future success! Trump Accounts add another option for families who want to help children build long-term financial security. Like any savings vehicle, they come with benefits, limitations, tax considerations, and investment risks. Which type of investment vehicle that you use will depend on you and your family’s priorities, tax status, and investment preferences.
Disclaimer:
The information provided herein is for informational and educational purposes only and should not be construed as individualized investment, tax, legal, or financial planning advice. Trump Accounts are subject to specific eligibility requirements, contribution limits, distribution rules, investment restrictions, and tax treatment, which may change as additional guidance is issued. Eligibility for any government contribution is not automatic and depends on applicable program requirements, including timely election procedures and current IRS guidance. The suitability of a Trump Account depends on each family’s circumstances, including savings goals, tax situation, investment time horizon, liquidity needs, and the availability of other savings vehicles such as 529 plans, UTMA accounts, and traditional or Roth IRAs. Investments held in a Trump Account may fluctuate in value, and there is no guarantee that the account will increase in value or achieve any particular result. Contributions, earnings, and distributions may be subject to federal and state tax rules, penalties, or other restrictions depending on the source of contributions, the timing and purpose of withdrawals, and applicable law. Families should review current IRS guidance, plan or account documentation, and consult with qualified tax, legal, and financial professionals before establishing or contributing to a Trump Account.
