Trump Accounts for Kids: $1,000 Seed, $5,000 Limit and How They Compare

By Tom, CPA · Updated October 27, 2026

Part of: Tax Planning

TL;DR: Trump accounts are IRAs for children under 18, created by the 2025 tax law. U.S. citizen kids born 2025 through 2028 can get a $1,000 federal seed. Families can add up to $5,000 a year starting July 4, 2026, employers can add $2,500 tax-free, and the money must sit in U.S. stock index funds until the child turns 18.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

The 2025 tax law (OBBBA) created a new savings account for children, called a Trump account. It is technically a traditional IRA set up for a minor, with special rules until the year the child turns 18. Contributions opened on July 4, 2026, so 2026 is the first year families are deciding whether to use one.

This guide explains the seed money, contribution rules, employer contributions, investment limits and how Trump accounts compare with 529 plans and custodial Roth IRAs. Information is current as of October 27, 2026, from IRS guidance and the IRS OBBBA provisions page. Treasury and IRS are still issuing guidance; check for updates. See also kids tax strategies and the tax planning guide.

CPA Warning Label: A brand-new account type with a famous name and a long list of rules. The free $1,000 is excellent. The rest needs comparison shopping, like any product launched with a lot of fanfare.

$1,000 seed eligibility

The federal government will deposit $1,000 into a Trump account for a child who:

• Is born from January 1, 2025, through December 31, 2028.
• Is a U.S. citizen.
• Has a Social Security number.
• Has a parent or guardian who makes the election, generally on IRS Form 4547 or through the online process Treasury provides.

The seed is a one-time deposit per child. It is not taxable when made and does not count against the annual contribution limit. Children born before 2025 can still have a Trump account, but they do not get the seed. Families with a 2025 or 2026 baby should make the election even if they never plan to contribute, because free money in a long-term index fund for 18 years is the kind of deal that rarely comes around.

Some private donors and states have announced additional deposits for certain children; such general contributions are treated differently from family contributions. Check what applies in your state.

Contribution limits

Because family contributions are not deductible but earnings are taxed on withdrawal, the after-tax money creates basis in the account. When the child withdraws later, the basis comes out tax-free and the earnings are taxed, similar to a nondeductible IRA. Employer contributions, by contrast, are excluded from the parent's income, so they have no basis and are fully taxable when withdrawn. Keep records of contributions, just as you would track nondeductible IRA basis.

Gifts into the account count toward the annual gift tax exclusion ($19,000 per donor per child in 2026).

Employer contributions

Employers can contribute up to $2,500 per year to the Trump account of an employee's child or dependent, and the amount is excluded from the employee's income. Employer contributions count toward the $5,000 annual limit. The employer program must be set up as a written plan, similar to other fringe benefits.

The exclusion comes from a new Section 128 of the tax code, which works like other employer fringe benefits: the employer adopts a written plan and must follow eligibility rules set out in the statute and IRS guidance, so check with HR on how your plan works. If your employer offers this, take it: it is tax-free money that otherwise would not exist. Check during open enrollment whether your company has adopted a plan; many have not yet.

Investment rules

Until the year the child turns 18, Trump account money must be invested in eligible investments: mutual funds or ETFs that track a qualified index made up mostly of U.S. companies, such as the S&P 500, with low expense caps and no leverage. No individual stocks, bonds, crypto or sector funds. Withdrawals are generally not allowed before that year.

That makes the account boring in the best way: broad market, low cost, long horizon. Once the child reaches the year they turn 18, the account follows normal traditional IRA rules: they can invest it any way an IRA can, convert it to a Roth, or withdraw, with taxes and the 10% early withdrawal penalty unless an exception applies (such as higher education or a first home, up to $10,000).

vs 529 and custodial Roth

Ranking for most families:

1. Take the free seed and employer money in a Trump account.
2. If the child has earned income, fund a custodial Roth first: tax-free growth beats tax-deferred growth on after-tax dollars.
3. For college, a 529 with a state deduction is usually better.
4. Extra family contributions to a Trump account make sense mostly when the others are maxed, or when you want a long-term account with no earned income requirement.

How to open one

There are two paths, and both run through Treasury rather than your local brokerage, at least at first.

• Automatic enrollment. According to the IRS, starting October 1, 2026, Treasury began automatically enrolling eligible children in Trump accounts. If your child was enrolled this way, you do not need to file to open the account, but you do need to claim and activate it to manage it.
• Form 4547. If your child does not already have an account, a parent, guardian or other authorized individual files Form 4547, Trump Account Election(s), through the Trump Accounts app, the Trump Accounts website or an IRS Individual Online Account. It can also be filed with a tax return.
• The seed needs its own election. Even an automatically opened account does not get the $1,000 pilot contribution unless you claim the account and make the separate seed election (in the claiming process or on Form 4547). Treasury deposits it after the account is confirmed, and not before July 4, 2026.

The person who opens the account becomes the responsible party until the child reaches adulthood. Expect phishing: scammers love a new government program with a dollar sign attached. The IRS confirms Form 4547 is a real form; it will never be a text message asking for a gift card.

Later, the account can be moved by a qualified rollover of the entire balance to another Trump account trustee, as permitted under IRS guidance.

Who might skip extra contributions

Families who should usually take the seed and stop there:

• Families not yet maxing their own retirement accounts. Your 401(k) and Roth IRA come first; your child can borrow for college but you cannot borrow for retirement.
• Families saving mainly for college, especially in a state with a 529 deduction.
• Teens with earned income, who usually get more from a custodial Roth.
• Families worried about control. At adulthood the money is the child's.

Early retirees with low income may also prefer to keep cash flexible in bridge accounts rather than locking it in a child's account for up to 18 years.

Illustration

Ava was born in March 2026. Her parents elect the $1,000 seed, and her mother's employer contributes $1,000 a year. Her grandparents add $1,000 a year. Assume 7% annual growth (hypothetical, not a forecast) for 18 years:

• Seed alone: $1,000 grows to about $3,400.
• $2,000 a year of contributions for 17 years plus the seed: roughly $65,000 to $70,000 at 18, depending on contribution timing.

Of that, about $34,000 is contributions; the employer's $17,000 is pre-tax money with no basis, and the grandparents' $17,000 is basis. At 18, Ava could leave it to grow for retirement, or convert some to Roth in a low-income year, such as a college summer with little income, paying tax at her own low rate. That conversion step is where the account starts acting like the Roth conversion playbook for adults.