June 2026
By Larissa Zeiler
CPA, Leffel, Otis & Warwick, P.S.
Trump accounts are a new tax-favored savings account for children, established under the One Big Beautiful Bill passed July 4, 2025. A Trump account can be opened for a child up until the year before the child’s 18th birthday. Authorized individuals (parents or guardians) can create an account by filing an election with the IRS on Form 4547, Trump Account Elections, or by going to trumpaccounts.gov to file the election. The online portal is currently live, but contributions cannot be made until after July 4, 2026.
Funding: Contributions are generally limited to $5,000 per year, per account, with a cost-of-living adjustment after 2027. There is no tax deduction allowed for the contributions. For children born during calendar years 2025 through 2028, the US Treasury will fund $1,000 through a pilot program if the election is filed. Employers can also annually contribute up to $2,500 per employee, tax free, to the Trump account of an employee or any dependent of the employee. The pilot program and employer contributions do not count toward the $5,000 limit.
Growth & Distributions: To illustrate, assume a Trump Account is opened for a child born in 2026. The government provides the initial $1,000 contribution, and the parents continue to contribute the maximum $5,000 annually (adjusted for inflation). By the time the child turns 18, the account value will grow to over $150,000, assuming an annual rate of 4.5%. Funds in the Trump account can be invested in eligible investments, likely U.S. equity funds. More details and a list of eligible investments are still forthcoming. Once the child turns 18, the account becomes a traditional IRA and is governed by traditional IRA rules. Earnings from Trump accounts are subject to tax at ordinary income tax rates when the money is distributed. Additionally, a 10% penalty applies for early distributions. Exceptions include distributions used for qualified higher education expenses, first home purchases, or distributions made after age 59 ½.