Broker Check

1801 F Street, Bellingham, WA 98225

(360) 738-6019
info@west-invest.com
Client Center
530A:

530A: "Trump Accounts"

February 09, 2026

You’ve probably heard about “Trump Accounts” for kids in the news. This new type of IRA that lets families save and invest until adulthood. These accounts offer tax-advantages and they don’t affect other IRA eligibility. Oh, and there’s potential for a free $1,000 contribution from the government. Let’s take a deep dive into the specifics of these new accounts.

The Basics

Trump accounts are new IRAs created just for kids as part of the One Big Beautiful Bill Act. Importantly, legislation is still being finalized and no contributions can be made to Trump Accounts until July 5, 2026, but parents can elect to open a Trump Account for their children when they file their taxes. Here’s what to know:

  • Parents or legal guardians can open a Trump Account for each of their children who are U.S. citizens and are under the age of 18.
  • Anybody can contribute to a child’s Trump Account, including:
    • Individuals,
    • Employers,
    • Government agencies,
    • Charitable organizations
  • Funds cannot be withdrawn before January 1st of the year in which the beneficiary will turn 18 years old.
  • Taxation treatment varies based on who makes contributions, more on that later, but regardless of where contributions come from earnings grow tax-deferred, meaning they are only taxed at the time of withdrawal.
  • As part of a government pilot program, babies born between Jan 1, 2025 and Dec 31, 2028 will receive a $1,000 contribution from the federal government for whom an Trump Account is opened.
  • There are certain eligible investments established by the U.S. treasury that Trump Accounts may be invested in.
  • Annual fees for these accounts cannot exceed .1%.
  • Trump Accounts may be used in tandem with other types of accounts intended for saving for children.

Contribution Limits

There are contribution limits that vary based on who is making a contribution.

  • Any individual may make contributions to any child’s Trump Account, limited to $5,000 total annually (that’s not $5,000 per person contributing, that’s total!)
  • Employers may make contributions to Trump Accounts, on behalf of their employees or their employee’s dependents, up to $2,500 per year. These contributions also count toward the $5,000 total contribution limit!
  • Government agencies and charitable organizations can make contributions that do not count toward the $5,000 contribution limit.

Taxation

Who is making a contribution also determines the taxation of the contribution.

  • Individual contributions are made after-tax, meaning that the contributions themselves are not taxed at withdrawal
  • All other contributions are pre-tax, meaning that the contribution amount is subject to taxation at the time of withdrawal.
  • Regardless of contribution source, earnings grow tax-deferred and are subject to taxation at the time of withdrawal.
  • Regardless of contribution source, withdrawals are subject to a 10% early withdrawal penalty if taken before age 59 ½ (there are exceptions).

Options at Age 18

When a child who is the beneficiary of a Trump Account turns 18, they have several options regarding what to do with their Trump Account funds. They can:

  • Rollover the Trump Account to a traditional IRA
  • Convert the Trump Account to a Roth IRA by paying income tax on earnings and any eligible contributions, allowing for tax-free growth moving forward.
  • Rollover the Trump Account to an employer plan such as 401(k), 403(b), or 457(b)
  • Make withdrawals, for any purpose, subject to taxation as ordinary income and subject to the early withdrawal penalty if taken before age 59 ½ (again, there are exceptions).

Other Savings Strategies

Trump Accounts are just one of several ways to invest for your children or grandchildren, and each vehicle for gifting has it’s own advantages and disadvantages. Check out another one of our blogs to learn more about other means of gifting: Building Generational Wealth: Strategic Approaches to Financial Gifting

Examples: Combining Strategies

The best way to combine strategies for saving for children (and if a Trump account is right for your family) really depends on your current financial situation and your goals. The strategies are also subject to change from year to year as legislation changes.

Examples: If you had or will have a baby between Jan 1, 2025 and Dec 31, 2028, you can open a Trump account to get the free $1,000 contribution from the government while the pilot program is in place.

  • Even if no contributions are made, trumpaccounts.gov predicts that $1,000 could grow to $243,000 by age 55.
  • Or, you can let that $1,000 sit and potentially grow until the child is filing their own taxes, at which point they can convert the Trump account to a Roth IRA. They may be at a low tax bracket at this point in their life, and they’ll never have to pay taxes on the funds again.
  • Or, you can take the $1,000, and contribute the maximum amount of $5,000 every year until age 18. At age 18, when it becomes a traditional IRA, the owner of the account can let it grow until age 59 ½, at which point the balance could be approximately $6.3million (based off hypothetical annual returns of 8%). But all of that growth is taxable!

Resources