The One Big Beautiful Bill Act (OBBBA) introduced a brand-new savings vehicle: Trump Accounts. At first glance, they appear to be traditional IRAs, but they come with special rules for beneficiaries under the age of 18. Used wisely, they can provide a powerful head start on your child’s financial future.
Free Starter Money for Newborns
As part of a pilot program, parents of U.S. citizen newborns in 2025-2028 can elect to enroll their child in a Trump Account. Once the parent makes the election, the federal government will deposit $1,000 of free seed money into the account.
Starting July 4, 2026, parents, grandparents, or others may contribute up to $5,000 per year (indexed for inflation beginning in 2028) until the year the child turns 18. The $1,000 government contribution does not count against this limit. To participate, your child must have a Social Security number when you make the election.
How Trump Accounts Work
- Contributions by individuals made before the year the child reaches age 18 are not deductible, but funds inside the account grow tax-deferred.
- No withdrawals are permitted until the child reaches the age of 18.
- When the child reaches 18, the Trump Account automatically converts into a traditional IRA, subject to the normal rules governing IRA contributions and distributions.
- At that point, your child must have earned income to continue contributing. The account can later be converted into a Roth IRA if desired.
Investments and Employer Contributions
Until the child turns 18, the account can only hold “eligible investments”—low-cost index mutual funds and ETFs that meet IRS guidelines.
Employers may also contribute up to $2,500 annually (indexed for inflation after 2028) to Trump Accounts set up for under-age-18 employees or dependents of employees. These contributions are tax-free to the employee and deductible for the employer as fringe benefits.
State, local, or nonprofit organizations may also make contributions under future IRS rules.
Why This Matters
Over time, Trump Accounts can grow into substantial savings. For example, if you contribute $5,000 annually for 17 years, plus the $1,000 government seed, and the account grows at 5 percent per year, it could be worth about $138,000 by the time your child turns 18. If left invested until your child reaches age 60, that balance could grow to over $1.2 million.
Unlike 529 plans or Coverdell accounts, Trump Accounts don’t require your child to use the funds for education. Unlike custodial accounts or trusts, they offer tax-deferred growth and avoid many of the kiddie tax pitfalls.
Bottom Line
Trump Accounts may not be perfect, but with free starter money, meaningful contribution limits, potential employer or community support, and decades of tax-deferred compounding, they can be a strong wealth-building tool for children.
Green Krist, CPA specializes in assisting taxpayers with IRS and North Carolina Department of Revenue issues in the greater Raleigh, North Carolina area.
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