H.R.1, the tax bill that passed in 2025, created a new federally authorized, tax-advantaged investment savings account for eligible minors called Trump Accounts. These new account types are eligible to be opened and may begin receiving contributions on July 4, 2026. Children who are U.S. citizens, have a valid Social Security number and born between January 1, 2025 and December 31, 2028, qualify for a one-time $1,000 federal contribution to their Trump Account if a parent or guardian makes an election on their behalf. Family members, charities, certain governmental entities and employers of parents or guardians may also make contributions into these accounts on behalf of the beneficiary. These accounts have an annual contribution limit of $5,000. The U.S. Treasury has designated BNY Mellon as financial agent for the program; BNY Mellon will manage the initial accounts and help develop the account app, while Robinhood will serve as brokerage and initial trustee. The U.S. Treasury will retain control over the app and operations for these initial accounts. Parents or guardians may open a Trump account by filing a Form 457 with the IRS or by registering through the official Trump Accounts portal at www.trumpaccounts.gov after the portal goes live on July 4, 2026. (IRS)
These accounts may be useful as a modest long-term savings starter, particularly for families with a newly born child or grandchild who qualifies for the $1,000 federal contribution. However, these accounts come with limitations similar to those found in traditional IRAs. Additionally, Trump Account funds must generally be invested in qualifying low-cost mutual funds or ETFs that track broad U.S. equity indices. This investment limitation is lifted on January 1 of the calendar year in which the beneficiary turns 18. After this point, the account operates as a traditional IRA with standard IRA rules. Other limitations that differ from traditional IRAs include a lower annual maximum contribution of $5,000 and withdrawals generally are not permitted before January 1 of the year the child turns 18 as there are no hardship withdrawal exceptions. (IRS)
Families may want to consider this type of account as an additional long-term savings strategy rather than replacement for 529 Plans or other custodial accounts that are designed for education savings. Beneficiaries will be able to use funds from their Trump Accounts after age 18 for qualified higher education expenses or a first home purchase without triggering the standard 10% early withdrawal penalty that applies to IRA distributions, but withdrawals are still taxable as ordinary income. By contrast, withdrawals from a 529 Plan are generally tax-free when used for qualified education expenses. Families may find the accounts worthwhile as a supplemental long-term investment vehicle, and any contributions should be considered as a part of a family’s comprehensive investment and savings strategy.