Everything Parents Need to Know about Trump Accounts
- Daniel Kurt
- 3 days ago
- 5 min read
Main takeaways
Children born between 2025 and 2028 can receive a one-time $1,000 government contribution just for opening a Trump Account.
Early withdrawals before age 59½ trigger a 10% penalty and income tax unless an exception like education costs or a first home purchase applies.
Trump Accounts lack some of the tax benefits of a 529 plan, so parents saving for educational needs may want to put their own money elsewhere.
A full year after the sprawling One Big Beautiful Bill was signed into law, one of its more novel provisions finally went into effect on July 4: Tax-advantaged Trump Accounts designed to help children build savings.
The accounts work much like the individual retirement accounts that adults use to save for their own future needs. But they offer a big incentive that IRAs don’t—$1,000 in government seed money for eligible kids.
If you’re considering a Trump Account for your son or daughter, here’s what you should know before deciding to enroll.
What is a Trump Account?
A Trump Account—officially known as a 530A account—is a tax-advantaged savings vehicle designed to help American children under 18 build toward retirement or other long-term goals, like buying a first home or paying for college.
Perhaps their biggest appeal is free seed money—children born between 2025 and 2028 are eligible to receive a one-time $1,000 contribution from the Treasury Department. In addition, parents and other eligible contributors can put money into a minor’s account to build their balance over time.
Who can open a Trump Account?
Parents and legal guardians can open a 530A account for any children under age 18 with a valid Social Security number. However, only children born between 2025 and 2028 are eligible for the $1,000 deposit from the Treasury Department.
Who can contribute?
Contributions to Trump Accounts can come from a variety of sources:
Family
Friends
Philanthropic and charitable organizations
Employers
State governments
Several major companies—including Charles Schwab, Mastercard, Visa and Dell Technologies—have already announced plans to match parent contributions. So there’s a powerful incentive for families to tap those benefits.
In addition, philanthropists Michael and Susan Dell are committing $6.25 billion of their own wealth to supplement Trump Accounts for children under the age of 10. Several wealthy donors have also pledged seed money for children in their state.
Who controls a Trump Account?
A parent or legal guardian manages the account for their child until they reach age 18. At that point, the child takes full control over the assets and can make withdrawals. That aspect may represent a deterrent for parents worried about their child having complete access to their investments when they’re still quite young.
How do you open a Trump Account?
There are a couple ways you can open an account for your child. The most direct route is to download the official Trump Accounts app—available on the Apple Store and Google Play—which allows you to sign up for and manage your child’s account. Alternatively, you can complete Form 4547 and attach it to your annual tax return to get an account started.
What are the investment choices for a Trump Account?
Initially, all contributions will be invested in the State Street SPDR Portfolio S&P 500 ETF (SPYM), providing broad exposure to large U.S. companies.
However, Treasury has announced that several other funds will be added in the coming months to increase potential exposure across the equity markets. These include:
iShares Core S&P 500 ETF (IVV)
Vanguard Total Stock Market ETF (VTI)
State Street SPDR Portfolio S&P 1500 Composite Stock Market ETF (SPTM)
iShares Core S&P total U.S. Stock Market ETF (ITOT)
According to the official Trump Accounts website, these investment options are “designed to maximize long-term growth while minimizing risk.” However, the accounts won’t offer the ability to invest in bond funds or other more conservative assets in order to mitigate stock market volatility.
How are Trump Accounts taxed?
Contributions from family members are made with after-tax dollars. However, money provided by employers, charities and governments are considered pre-tax contributions; therefore, parents don’t have to report the amount as income on their tax return.
Once money is invested in a Trump account, it grows on a tax-deferred basis. Because the child doesn’t have to pay tax on dividends or interest that accrue within the account, their balance has the potential to grow at a faster pace than a standard brokerage account.
When the beneficiary is eligible to withdraw money from the account, the tax treatment depends on the original source of the funds. For the portion that came from a family member’s contribution, they pay ordinary income tax on any investment earnings—but none on the contribution itself (their “basis”). For funds that originally came from a pre-tax source (e.g. a charity or government), there is no cost basis involved so they’ll pay ordinary income tax on the entire amount of the disbursement.
When a distribution is made, it’s treated as a proportional mix of after-tax and pre-tax dollars, based on the ratio of total basis to total account value at the time of the withdrawal. The hope is that the financial companies managing the accounts will help accountholders do this rather tedious calculation. But keeping meticulous records is never a bad idea, just in case.
When can beneficiaries withdraw their money?
Money in a 530A account must stay put until the beneficiary reaches age 18. Unlike other retirement accounts, there are no hardship withdrawals that would allow the parents to take out money earlier.
Once the child reaches age 18, traditional IRA rules apply to their assets. If they want to take money out before age 59½, they have to qualify for an exception or else pay a 10% penalty—and any income taxes that apply to the withdrawal. Exceptions include higher education expenses and the purchase of a first home (up to $10,000 lifetime).
How do Trump Accounts compare to 529 plans?
If you’re saving money specifically for your child’s eventual college or private K-12 education, 529 plans offer certain advantages that Trump Accounts don’t. For instance, withdrawals from a 529 are completely tax-free when used for eligible education expenses. And some states offer their own income tax breaks on family member contributions.
Additionally, education savings plans offer greater choice when it comes to your investment strategy. You can balance stock funds with bond funds or even use a target-date fund that automatically becomes more conservative as your child gets closer to college age.
Even if your son or daughter doesn’t end up needing 529 money for a university education, you can transfer the balance to another family member. Alternatively, if the 529 is at least 15 years old, they can roll the funds into a Roth IRA—just keep in mind that these rollovers are subject to the annual Roth IRA contribution limit and there’s a lifetime cap of $35,000.
Either way, you probably want to open a Trump Account and snag the $1,000 of seed money if your child qualifies. You’ll just want to be strategic about where to invest your own dollars if you’re thinking about a private school or college.
