Are Trump accounts worth a spot in your clients’ strategy? A tax pro’s guide to the new children’s savings tool

As part of recent legislation known as the One Big Beautiful Bill Act, a new tax-advantaged savings vehicle has emerged, known as the Trump account. Beginning in 2026, these accounts offer unique planning opportunities for families with children and open new conversations for tax professionals working with parents, employers and financial planners.  

What is a Trump Account? 

Trump accounts are new savings accounts that function similarly to traditional IRAs but are designed specifically for children under the age of 18. These accounts are tax-deferred, not Roth, and cannot be designated as such. While contributions are not deductible, earnings grow tax-free until withdrawal.  

Contributions can be made starting July 4, 2026, though banks may begin accepting funds on Monday, July 6, due to the holiday weekend. The accounts are intended to encourage early saving habits for children, with eligible contributions being made from families, employers and even the federal government through a pilot program. 

Who is eligible?  

Eligible individuals for a Trump account are children under the age of 18 who have a Social Security number issued before the account is opened. Each child can have only one Trump account, and it must be established during a year in which they are still under 18 years of age. 

Unlike IRAs, there is no income requirement or earned income test for the child, and each eligible individual may have only one account. Contributions to a Trump account do NOT impact the child’s ability to contribute to a traditional or Roth IRA, provided they meet all other IRA eligibility rules.  

Initial government contribution 

For children with a valid Social Security number born between Jan. 1, 2025, and Dec. 31, 2028, the federal government will contribute $1,000 to jumpstart the account, if a parent or guardian elects the pilot program during account setup. This contribution is not included in the child’s income.  

Annual contributions 

• $5,000 per year limit (combined from all sources), indexed for inflation after 2027 
• Personal contributions (from family or friends) are treated as gifts and count toward the annual gift tax exclusion limit ($19,000 in 2025 per donor). 
• Contributions do not affect the beneficiary’s ability to make traditional or Roth IRA contributions, if they’re otherwise eligible. 
• Employers can contribute up to $2,500 per year for each employee (or their dependents), tax-free to the employee. 

Timing:  

• No contributions are allowed before July 4, 2026. 
• Contributions for a given year cannot exceed the annual limit; excess contributions must be withdrawn along with any associated earnings, which are subject to a 100% tax if not removed promptly. 

Tax treatment of contributions and distributions 

Earnings in the account grow tax-free, but contributions are not tax-deductible. The funds cannot be withdrawn before the beneficiary turns 18. At that point, the account automatically transitions into a traditional IRA.  

Contributions 

• No deduction is allowed for contributions made before the beneficiary turns 18 
• Employer contributions (up to the annual limit) are excluded from the employee’s gross income 
• Qualified general contributions and pilot program contributions are also excluded from the beneficiary’s gross income 

Distributions

• No distributions are permitted before the beneficiary turns 18, except for certain rollovers, excess contributions or upon death 
• When distributions are allowed (generally after age 18), the tax treatment follows IRA rules, with special adjustments: the “investment in the contract” for tax purposes does not include government or pilot program contributions, or employer contributions excluded from income. 
• Early distributions of excess contributions are not included in gross income, but any earnings on the excess are subject to a 100% tax penalty. 
• If the accountholder dies before age 18, the account ceases to be a Trump account, and the fair market value (less investment in the contract) is included in the beneficiary’s estate or the recipient’s income.  
• Distributions from the account will be treated in the same manner as any other withdrawals from a traditional IRA. Withdrawals will be subject to income tax, and early withdrawals (those taken before age 59½) will also be subject to a 10% penalty. A portion of each distribution will be a nontaxable return of basis, with the remainder of the distribution taxed as ordinary income. (Only contributions from family and friends count as a basis. Government and employer contributions do not.)  

Rollovers 

• Rollovers between Trump accounts for the same beneficiary are permitted if the entire balance is transferred. 
• In the year the beneficiary turns 17 years of age, a full rollover to an ABLE account is allowed, provided the entire balance is transferred.  

Post-age 18 penalty exceptions (IRA rules) 

Once the account becomes a traditional IRA at age 18, Trump accounts follow the same penalty exception rules as traditional IRAs. Although early withdrawals are generally discouraged, the 10% early withdrawal penalty does not apply if the distribution is used for: 

• A first-time home purchase (up to a $10,000 lifetime cap) 
• Higher education expenses 
• Birth or adoption of a child (up to $5,000) 

These can provide flexibility later and should be discussed with clients during long-term planning.  

Permitted investments 

Only allowed are mutual funds or exchange-traded funds (ETFs) that: 

• Track a qualified index (e.g., S&P 500 or other broad U.S. equity indices) 
• Do not use leverage 
• Have annual fees and expenses not exceeding 0.1% of the account balance 

No other types of investments are permitted before the beneficiary turns 18. After age 18, the account holder gains full control and can invest the funds as they would in any other traditional IRA.  

Special situations such as disability or death 

If a beneficiary dies before age 18, the account is treated as fully distributed:  

• The account ceases to be a Trump account 
• The fair market value (less investment in the contract) is included in the gross income of the recipient (or the estate, if applicable) in the year of death 

The law does not provide a specific disability distribution provision but allows for a full rollover to an ABLE account at age 17, which may be relevant for disabled beneficiaries.  This rollover is tax-free, provided the entire balance is transferred. 

Helping clients make the most of it 

Trump Accounts might be new, but they could play a big role in your client’s long-term savings strategies especially for families with young children. These accounts offer a rare mix of government support, flexible contributions and tax-deferred growth that’s worth paying attention to.  

As a tax pro, you’re in a great position to start the conversation. Whether it helps clients understand the rules, explore employer contributions or plan for future withdrawals, your guidance will make a real impact. As 2026 approaches, NATP will keep Trump accounts on our radar, so you’re equipped with the resources, insights and tools to help clients build a stronger financial future.