What is the new Trump account and how does it function?

A Trump Account is a new federal, tax-advantaged investment account created by the One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025. It’s designed to help families start saving early for a child’s future by using a custodial retirement-style account that grows tax-deferred and can be used after age 18.
 
Who is eligible?

• Children under age 18 who have a valid U.S. Social Security number are eligible to have a Trump Account established on their behalf.
• A pilot program contribution is available only for U.S. citizens born between January 1, 2025 and December 31, 2028.

 
How does a Trump Account function?

• The account is owned by the child, but managed by a custodian (often a parent or guardian) until the child turns 18.
• Trump Accounts operate similarly to traditional IRAs: contributions grow tax-deferred, and distributions after age 18 are generally taxed like traditional IRA withdrawals.
• Funds must be invested in eligible low-cost mutual funds or exchange-traded funds (ETFs) that meet Treasury/IRS requirements, typically broad U.S. equity index funds.
• Investment choices are limited to ensure tax-advantaged, long-term growth.
• No withdrawals are permitted generally before the year the child turns 18 (the “growth period”).

 
How are contributions made?

• Individuals (parents, relatives) can contribute after-tax funds up to the annual limit.
• Employers can contribute up to $2,500 per year (counts toward the child’s annual limit) under a formal contribution program.
• Government and qualified charities can make special contributions that do not count toward the annual limit for specified classes of beneficiaries.

 
Annual limits:

• Contributions from all sources (other than pilot, government, or qualified charitable contributions) are capped at $5,000 per child per year during the growth period, indexed for inflation beginning after 2027.

 
What is the pilot program and how do I opt in?

• Under the initial pilot program, the federal government makes a one-time $1,000 contribution to a Trump Account for each eligible child born between January 1, 2025 and December 31, 2028 who is a U.S. citizen with a Social Security number.

 
Opt-in process:

• To receive the pilot program contribution, a Trump Account election must be made on behalf of the child.
• Parents/guardians will need to submit the required election form (IRS Form 4547 or equivalent) with the child’s Social Security number and other information.
• The account must be established before government contributions are deposited; contributions begin after the account is activated (expected starting July 4, 2026).

 
Note: Children who do not qualify for the $1,000 pilot seed still can open a Trump Account — they simply do not receive the government initial contribution.
 
Taxes and reporting

• Contributions from parents or individuals are after-tax (no deduction).
• Employer contributions made under a formal program may be excluded from the employee’s income.