If you've been hearing about "Trump Accounts" in the news, you're not imagining it — they're real, and as of July 4, 2026, they're officially open. Created under the 2025 tax law known as the One Big Beautiful Bill Act (also referred to as the Working Families Tax Cuts), Trump Accounts are a brand-new type of tax-advantaged savings account for children. Below is a rundown of how they work, who qualifies, and what to consider before opening one.

What Is a Trump Account?

A Trump Account is essentially a custodial version of a traditional IRA, for the benefit of a child under 18. It's owned by the child but administered by a parent, guardian, or other authorized adult (called the "responsible party") until the child reaches adulthood. Once the beneficiary turns 18, the account converts into a standard traditional IRA and is governed by traditional IRA rules from that point forward.

Who Is Eligible to Open One?

Any child who:

• Has not turned 18 by the end of the calendar year in which the election is made, and
• Has a valid Social Security number

can have a Trump Account opened on their behalf. An election is typically made by a parent, guardian, or other authorized individual using IRS Form 4547 (Trump Account Election), either filed with a tax return, submitted through the IRS Individual Online Account, or mailed directly to the IRS.

Who Qualifies for the Government's $1,000 Seed Contribution?

This is where a lot of confusion comes in — eligibility to open an account and eligibility for the government's contribution are two different things.

The one-time $1,000 pilot program contribution is available only to children who:

• Are U.S. citizens with a valid Social Security number, and
• Were born between January 1, 2025, and December 31, 2028

The $1,000 seed does not count against annual contribution limits, and it's requested via the same Form 4547 election.

Who Offers Trump Accounts Right Now?

While the U.S. Treasury oversees the program, banks and other financial institutions are administering the accounts. For the initial launch, the U.S. Treasury — not a bank or brokerage — establishes and holds the account. Robinhood and Bank of New York Mellon (BNY) are managing the initial accounts. The law caps expenses at 0.10% (10 basis points), and no leverage is permitted. Account owners don't get to hand-pick individual stocks during this phase.

Once an account is established, families will be able to roll it over to a private financial institution. Fidelity, Charles Schwab, Vanguard, and Bank of America have all indicated they'll support Trump Account rollovers, each planning to offer a qualifying low-cost S&P 500 or broad-market index fund. A number of employers (including several major companies) have also announced they'll match or seed contributions for employees' children as a workplace benefit. Expect this list of participating institutions to keep expanding through 2026 and beyond as the IRS finalizes rollover guidance.

A word of caution: Treasury has stated that official communication about Trump Accounts will only come from no-reply@TrumpAccounts.Treasury.gov. Be wary of unsolicited calls, texts, or emails claiming to help you "set up" or "fund" an account.

Contribution Limits

• $5,000 per year, per child, combined across all contributors (parents, grandparents, other individuals). This limit is indexed for inflation starting in 2027.
• The $1,000 government seed and qualified charitable/general contributions do not count against this $5,000 cap.
• Employers may contribute up to $2,500 per year (also indexed after 2027) on behalf of an employee's child, and this amount counts toward the $5,000 annual limit — but it is excluded from the employee's taxable income.
• Unlike a traditional or Roth IRA, contributions are not limited by the child's earned income. A child with no job can still receive the full $5,000.
• Excess contributions are subject to a 6% excise tax until corrected.
• Contributions are made with after-tax dollars and are not tax-deductible; growth inside the account is tax-deferred.
• Unlike Roth IRAs, there are no AGI limitations on making contributions.

How and When Can Funds Be Accessed?

• Before age 18: Generally, no withdrawals are permitted during the growth period, with very limited exceptions currently under IRS review.
• Starting January 1 of the year, the child turns 18: The account converts into a standard traditional IRA, and normal IRA distribution rules apply from that point — including the 10% early withdrawal penalty before age 59½, with the usual exceptions (first-time home purchase, qualified education expenses, etc.).
• Taxation of Distributions: As contributions are made with after-tax dollars, distributions made will likely be partially taxable. All earnings (including the $1,000 seed money) will be subject to ordinary income tax, while contributions will not be taxable.
• Roth conversion opportunity: Because young adults are often in a low tax bracket, converting some or all of the account to a Roth IRA shortly after age 18 can be an appealing strategy — worth discussing with a tax professional as this time approaches.

Other Things Worth Knowing

• Kiddie tax: Distributions taken while the beneficiary is a dependent (generally under 19, or under 24 if a full-time student) may be subject to kiddie tax rules, taxing unearned income above a certain threshold at the parent's marginal rate.
• Coordination with other accounts: Trump Accounts are not a replacement for 529 plans, Roth IRAs, or UGMA/UTMA accounts — think of them as another tool in the toolbox. Each has different rules around taxation, flexibility, and financial aid impact.
• Guidance is still evolving: The IRS has issued initial guidance (Notice 2025-68) and proposed regulations, but several areas — including full distribution and rollover rules — are still being finalized. Details may shift over the coming months.

This article is for general informational and educational purposes only and does not constitute tax, legal, or individualized investment advice. Rules governing Trump Accounts are still being finalized by the IRS and Treasury Department and may change. Please consult with your tax advisor and financial planner regarding your specific situation.

Sources: IRS.gov (Trump Accounts, Notice 2025-68, Form 4547), Federal Register (REG-117270-25), Congressional Research Service (R48910), U.S. Treasury (trumpaccounts.gov)

Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.

A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Limitations and restrictions may apply.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a required minimum distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.

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