Trump Accounts: The New Government-Seeded Investment Account Every Parent Needs to Understand

Written By Baker Business

Beginning in 2026, a brand-new federal savings program called the Trump Account will launch, aimed at helping families build long-term wealth for their children. While it functions similarly to a traditional IRA, it has its own rules, contribution limits, and planning opportunities that make it one of the most impactful family tax changes in years.

If you have children, grandchildren, or employees with young families, this program could significantly change how you approach education and retirement planning.

Let’s break it down.

What Is a Trump Account?

A Trump Account is a tax-advantaged investment account for minors under age 18. The Treasury Department will automatically fund eligible children with a $1,000 government contribution, and families can continue adding money annually.

The goal is to give every child a financial head start that compounds for nearly two decades before distributions are allowed.

Who Is Eligible?

To qualify:

  • The child must have a valid Social Security number.

  • The child must be born after 2024 and before 2029 to receive the government seed deposit.

  • Parents or guardians must elect to open the account via the new IRS Form 4547 or online IRS portal (expected mid-2026).

Government Funding

Each eligible child will receive a one-time $1,000 contribution from the federal government.

This is not taxable income to the child, does not create basis, and does not count toward annual family contribution limits.

This is effectively “free money” — but only if the account is properly opened.

Annual Contribution Limits

ContributorMaximum Annual ContributionParents / relatives / others$5,000 per childEmployer contributionsUp to $2,500 (tax-free)Government$1,000 one-time seed

The $5,000 limit is indexed for inflation starting after 2027.

Important: Parents and relatives cannot deduct contributions.

Investment Restrictions

Trump Accounts are not free-for-all brokerage accounts. They may only be invested in:

  • Certain stock mutual funds

  • Exchange-traded funds tracking U.S. stock indexes

  • No individual stocks

  • No speculative investments

This restriction keeps the account focused on long-term growth rather than risky trading.

When Can the Child Access the Money?

Distributions generally cannot occur before age 18.

At age 18:

  • The beneficiary may take distributions.

  • Amounts attributable to original contributions are tax-free.

  • Investment earnings are taxable.

  • Early taxable distributions may face a 10% penalty, similar to early IRA withdrawals.

There are limited exceptions.

Rolling the Account Forward

Once the child turns 18, the Trump Account may be rolled into:

  • A Traditional IRA, or

  • Certain qualified retirement accounts

This means the account can continue growing tax-deferred into adulthood, making it a hybrid college-and-retirement vehicle.

A Real-World Example

Let’s say you open a Trump Account for a newborn in 2026.

  • Government seed: $1,000

  • Parents contribute $3,000 annually for 18 years

  • Average return: 7%

By age 18, that account could exceed $120,000 — all from modest annual contributions.

This is the power of starting early with tax-advantaged compounding.

Why Business Owners Should Pay Attention

Employers can contribute up to $2,500 tax-free per child for employees.

This opens the door for:

  • New family-focused benefits programs

  • Creative compensation strategies

  • Retention incentives in tight labor markets

This is particularly attractive for small businesses looking to compete with large benefit packages.

Key Planning Pitfalls

  • The IRS portal may not be ready until mid-2026 — delaying setup could cost families the government deposit.

  • Contributions cannot be made before July 4, 2026.

  • Investment choices are limited — improper asset selection may delay or void setup.

  • The accounts must be opened using the correct IRS process, or funding will be rejected.

Final Thoughts

The Trump Account is one of the most powerful long-term family wealth tools introduced in decades — but it will only benefit families who understand the rules and act quickly when the program opens.

At Baker Business & Tax Services, we’re helping parents, grandparents, and employers prepare now so they’re ready the moment the IRS opens enrollment.

If you have children under 18 — or employees who do — this is a planning conversation you should not postpone.

Baker Business
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