Trump Accounts, a new federal savings and investment vehicle for children, went live on July 4th.
According to the Treasury Department, more than 6 million Trump accounts have been opened for children under 18 so far. Of those, 1.4 million will receive the much-touted $1,000 federal pilot benefit for newborns.
But the total number of accounts opened is still just a fraction of the tens of millions of children under 18 who may be eligible for an account.
With all the attention Trump accounts have received in recent months — particularly federal seed money and money pledges from corporations and philanthropists — there’s a lot of fine print to know if you’re planning to open an account or have already done so.
That’s why…we’ve updated our one-stop-shop FAQ to answer your top questions from the basics to the details.
These are IRA-style investment accounts for eligible children. They are similar to traditional IRAs in that the money in the accounts grows tax-deferred. However, different rules apply to Trump accounts during the so-called “growth period,” which includes the first 18 years of a child’s life.
The account belongs to the child, but the parent, guardian or other authorized adult who opened it acts as custodian until the child reaches 18 years of age.
Individual contributions must be made with after-tax funds.
Withdrawals, which typically cannot be made until the year the child turns 18*, are taxed as ordinary income at the child’s tax rate, less the portion attributable to after-tax contributions made over the years, according to the Congressional Research Service.
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What conditions of participation apply to children and adults?
Only children who are U.S. citizens and have a valid Social Security number are allowed to have a Trump account. And no child is allowed to have more than one.
To be eligible for the one-time federal pilot contribution, the child must be born between January 1, 2025 and December 31, 2028.
The account must be opened by an “authorized person” on behalf of the child (also called a “beneficiary”). According to the CRS, if the account opener claims the $1,000 starting capital, that person “must be able to claim the child as a dependent for child tax credit purposes.” If the child is not If you are eligible for the $1,000 federal pilot benefit, that person may be a parent, guardian, adult sibling, or grandparent.
As for timing, according to the IRS, a child must be under 18 at the end of the year in which an account is opened for them.
To open an account, complete and submit Form 4547. This is the same form on which you elect to receive the $1,000 pilot contribution for eligible babies.
In addition to the federal government’s one-time contribution, multiple parties can make contributions to a child’s account. However, the rules and restrictions are different for each group.
Family and friends: Parents, grandparents and others can contribute. However, they do not receive any deduction for their contributions.
Employer: You can make pre-tax contributions to an employee’s child’s account. This money is tax-free for the employee. The employer contribution cannot exceed $2,500 per year per employee, not per child, registered agent David Mellem said. This annual limit will be adjusted for cost of living after 2027, according to the IRS.
States, Qualified Nonprofit Organizations and Philanthropists: Your contributions must be paid to “members of a qualified class” – for example, this could be all children of a certain age or living in households below an income limit.
Some business leaders — notably Michael Dell and Ray Dalio — have committed through their foundations to make one-time seed donations of $250 to the accounts of children from middle- to low-income households.
At least 84 outside entities — employers, foundations and states — have so far committed to contributing to Trump accounts, according to a list compiled by Americans for Tax Reform.
Contribution limits: Family, Combined contributions from friends and employers cannot exceed $5,000 per year for a single account. This limit will be adjusted to the cost of living from 2027. Contributions from governments and nonprofit organizations do not count toward the limit.
By law, contributions to Trump accounts must be invested in low-cost, broadly diversified U.S. stock index funds or exchange-traded funds. Your expense ratio can be 0.10% or less – so for every $1,000 in an account, the annual fee can’t exceed $1 per year.
Ahead of the July 4 launch, the U.S. Treasury Department announced that the default investment for all State Street SPDR Portfolio accounts will be S&P 500 ETF (SPYM), which tracks the performance of the S&P 500. It has an expense ratio of 0.02%.
The Treasury also noted that parents and guardians will have a choice of four additional funds to contribute to “in the coming months.” These funds are the iShares Core S&P 500 ETF (IVV); Vanguard Total Stock Market ETF (VTI); State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM) and iShares Core S&P Total US Stock Market ETF (ITOT).
Trump accounts are held on Robinhood, the commission-free trading and investing platform.
Parents and their children can keep track of investments using an app developed by Robinhood and the Bank of New York, both of which were chosen by the Treasury Department to manage Trump accounts in their early stages.
It depends on how much is deposited into the account each year and how well the index or exchange-traded funds in a child’s account performs.
Trump accounts essentially become traditional IRAs when a child turns 18.
Therefore, money withdrawn from the account before the child turns 59.5 may be subject to both income tax and a 10% early withdrawal tax.
However, the 10% penalty does not apply if the money is used for qualified expenses, including:
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Cost of higher education
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Buying a first home (up to $10,000)
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Birth or adoption costs (up to $5,000 per child)
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Emergency costs (up to $1,000 per year)
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Some medical expenses
Different tax rules apply to different contributions.
Contributions from private individuals (parents, relatives and friends) are not tax deductible. Instead, they are made with after-tax dollars.
Your after-tax contributions increase tax-deferred until a withdrawal is made, but this is not possible before the child turns 18.
These withdrawals – less the portion attributable to individual after-tax contributions – are taxed like ordinary income at the child’s tax rate. In other words, only the investment gains made from these people’s contributions are taxable when paid out to the child.
In contrast, contributions from governments, nonprofits, and employers are made with pre-tax money. They too will grow tax-deferred until withdrawals are made. However, when the child withdraws the money, the entire contribution plus the accumulated profits is taxed.
It depends, because each account type has its own rules and restrictions.
As Robinhood notes in its materials, “The right account depends on family goals, tax situation, and timeline.”
For example: What will the money be used for? When it comes to education, 529 plans may be better because you can withdraw the money tax-free. Or if it’s going to be used for retirement, a Roth IRA may be more beneficial because it also allows tax-free withdrawals – and has a higher annual contribution limit.
Investing in the future of children from birth is a welcome idea in many circles.
And under the best of circumstances—a child’s family can afford to contribute money each year, the parent works for an employer that offers additional contributions, the stock market does well during the account’s “growth phase,” etc.—a Trump account can be a much-needed source of funds for today’s children to offset the costs of college and early adulthood or to build a sizable nest egg for their later years.
But many families will not be able to afford to make many or no contributions in addition to the contributions they are eligible for from external parties. One criticism of the accounts is that they disproportionately benefit families.
Madeline Brown, a senior policy fellow at the Urban Institute, questions the usefulness of Trump accounts after the end of the $1,000 pilot for lower-income households because they already have low participation rates when it comes to saving for their children’s futures in other tax-advantaged plans such as 529s or Roth IRAs.
“About a third of families don’t have $2,000 in emergency savings, so it’s no surprise that they don’t have the resources to start saving [other plans] for their children,” Brown said.
Another potential concern is whether the money from a Trump account will reduce the child or family’s chances of being eligible for federal benefits, and if so, which ones. The answer is not clear.
To answer questions like “If I’m 18 and withdraw money from my Trump account, will that affect my ability to receive a Pell Grant?” Further guidance from federal and state legislators is required. or “Will money in a Trump account impact our eligibility to receive SSI payments?” said Elaine Maag, senior fellow at the Urban Institute.
https://www.cnn.com/2026/07/04/business/trump-accounts-faq
