“Things are strongest where they're broken.” – Louise Penny I began drafting this newsletter about the Federal Reserve in early January. The quote above is
The Truth About Trump Accounts
Published Date : January 9, 2026
Trump Accounts are a brand-new type of tax-advantaged investment account for children created by July 2025’s One Big Beautiful Bill Act (OBBBA). When OBBBA first became law, there was minimal information available regarding these accounts, but that has since changed with the launch of the official website: trumpaccounts.gov. We now know the IRS intends to roll out these new accounts starting in July 2026.
Essentially, a Trump Account is a children’s investment account that is similar in structure but not quite the same as a Traditional Individual Retirement Account (IRA). Eligible children are born between January 1, 2025 and December 31, 2028 and both the child and at least one parent/guardian must have a valid U.S. Social Security number. They may receive a one-time $1,000 initial contribution from the U.S. Treasury if an account is established by an adult custodian, typically a parent or legal guardian. The account belongs to the child, but the adult custodian controls the account, and no withdrawals are permitted until the child turns 18. At that point, control transfers to the child, and the account operates in a manner similar—but not identical—to a traditional IRA, including penalties for withdrawals made before age 59½. Because contributions are generally made on an after-tax basis, only the earnings on those contributions are subject to ordinary income tax upon withdrawal. Any pre-tax contributions, however, will be fully taxable at ordinary income tax rates when withdrawn.
There will be two options for parents or guardians to open a Trump Account: Either by filing IRS Form 4547 (Trump Account Election) with their tax return, or by enrolling directly through trumpaccounts.gov once the portal becomes active. The assets in Trump Accounts must be invested in certain mutual funds or ETFs that track broad U.S. equity indexes, with limits on fees and expenses (no more than 0.1% annually).
The accounts will be subject to a $5,000 annual contribution limit from all sources (parents, other family or employers), which will be adjusted for inflation starting in 2027. The $1,000 initial contribution from the federal government does not count toward the $5,000 annual contribution limit, and employers may also contribute up to $2,500 per year per employee as a pre-tax benefit. Importantly, contributions from parents or individuals to these accounts also do not count against the annual gift exclusion of $19,000 in 2026. This is because the contribution is not considered a “present interest” gift, as the child cannot access the funds until they turn 18. But fair warning—with that comes added complexity! Since contributions do not reduce the annual gift exclusion, contributors will be required to file a gift tax return, or Form 709, in each tax year that $25 or more is contributed.
As detailed above, Trump Accounts are fairly complex and may not be for everyone, but at the minimum, it doesn’t hurt to accept the free $1,000 seed contribution from the government if you have a child or grandchild that qualifies. Beyond that, parents need to weigh the pros and cons of adding funds to this account type. At Sand Hill, your Wealth Manager is available to discuss and help you review all the considerations. There may be more tax advantageous ways to save for your child’s future, and we look forward to strategizing the best path forward for your family.
Source: IRS, trumpaccounts.gov
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