Beginning in 2026, American families—both in the US and abroad—will have access to a new type of retirement savings tool for children under age 18: Trump Accounts. Created under the One Big Beautiful Bill Act and structured as traditional IRAs with special childhood rules, Trump Accounts allow families to begin investing early in long-term, low-cost index funds while taking advantage of unique contribution opportunities, including a federal $1,000 deposit for eligible newborns.
Trump Accounts follow a dedicated set of rules during childhood and then transition into a standard traditional IRA framework once the child reaches adulthood. Below is a clear, practical overview of how these accounts work, written for families who want to understand the benefits and rules without navigating statutory language.
A New Financial Tool for Children Starting in 2026
The earliest contributions to Trump Accounts may be made no earlier than mid-2026, because the law requires a 12-month period between enactment (July 4, 2025) and the start of allowable funding.
Once available, these accounts give families a way to invest for children using a predictable, tax-advantaged structure—with strict limits on investment options and contribution types to keep the focus on long-term, low-cost growth.
Childhood Rules: How the Account Works Before Age 18
A Trump Account operates under special rules until January 1 of the calendar year in which the child turns 18. During this “growth period”:
- Contributions are nondeductible.
- The child does not need earned income for contributions.
- Investment choices are restricted to broad, low-fee US index-tracking funds.
- Withdrawals are only allowed in the limited situations.
- Some types of contributions do not count toward the annual limit.
Once the growth period ends, the account continues as a Trump Account but follows standard traditional IRA rules.
Eligibility: Who Can Open the Account and for Whom
A child qualifies if:
- They are under 18, and
- They have a Social Security number.
The account must be opened by an adult on the child’s behalf. Authorized individuals include a legal guardian, a parent (if no guardian), an adult sibling and a grandparent.
US citizenship is required only for the $1,000 pilot program—not for the account itself.
Contribution Limits Explained
During childhood, families may contribute up to $5,000 per year in total nondeductible contributions. This limit includes employer contributions and is indexed for inflation starting in 2028.
Certain types of contributions are exempt from this limit:
- A rollover from another Trump Account for the same child
- Qualified general contributions made by states, tribal governments, or 501(c)(3) organizations
- The $1,000 pilot program contribution
Employers may also contribute up to $2,500 per year on behalf of an employee or the employee’s dependent through a qualifying program. Employer contributions:
- Are not taxable to the employee, but the child does not receive basis
- Count toward the $5,000 annual cap on non-exempt contributions
- Are indexed for inflation beginning in 2028
All contributions during childhood are nondeductible, and earned income is not required for the child during this period.
Example – Trump Account Contribution Program
Company, LLC, establishes a Trump Account Contribution Program in 2026. The company contributes $2,500 for the children of the employees who are under the age of 18.
Jane is an employee, and her son Will receives a contribution of $2,500. Jane is not taxed on the contribution under IRC Section 128(a), but Will does not receive any basis under IRC Section 530A(d)(2).
Jane and others can only contribute another $2,500 to the account, up to the $5,000 contribution limit.
Contribution Timing and the Federal $1,000 Deposit
When contributions can begin
Funding cannot begin before mid-2026, and all contributions for a given year must be completed by December 31.
The $1,000 Treasury contribution
Children born between 2025 and 2028 may receive a $1,000 government deposit if:
- They were US citizens,
- Have a Social Security number,
- Are a qualifying child of the taxpayer under the dependency rules, and
- Have not previously had a pilot program election made for them.
Important details:
- This $1,000 does not count toward the annual contribution limit.
- The election to open the account and the election to receive the $1,000 must be made together.
- Penalties apply for negligence ($500) or fraud ($1,000) if improperly claimed.
- If the Social Security number is missing, the IRS treats it as a math error, allowing adjustment without a notice of deficiency.
What You’re Allowed to Invest In
During childhood, the investment rules are intentionally narrow. The goal is to keep these accounts focused on simple, diversified, low-cost growth.
Permitted investments include:
- Track a US index (e.g., S&P 500)
- Hold mainly US companies
- Charge less than 0.1% in annual expenses
- Avoid the use of leverage
The account may not invest in individual stocks, industry-specific funds, foreign-based indexes, money market funds, or hold cash except temporarily.
After the child turns 18 (using the January 1 rule), these restrictions fall away and the account may invest in the full range of assets allowed for traditional IRAs.
When Withdrawals Are Allowed
Before age 18, money generally can’t be withdrawn, except for a few situations the law allows., including:
- A full balance transfer to another Trump Account belonging to the same child
- A rollover to an ABLE account during the year the child turns 17
- The return of excess contributions
- Distributions required due to the death of the beneficiary
Beginning January 1 of the calendar year the child turns 18, the account follows standard traditional IRA withdrawal rules. Distributions may be taken for any reason but may be subject to income tax and, if taken before age 59½, an additional 10% penalty unless an exception applies.
What $5,000 Could Grow Into Over 18 Years
Here’s an example showing a value of $5,000 invested at the beginning of the year for 18 years (compounded annually)
| 6% Rate of Return: | $163,800 |
| 8% Rate of Return: | $202,231 |
| 10% Rate of Return: | $250,795 |
| 12% Rate of Return: | $312,198 |
Tax Treatment: Understanding Basis and Earnings
During childhood:
- Contributions are not included in the child’s income.
- The account grows tax-deferred.
- Basis is received only for non-exempt personal contributions.
- No basis is provided for:
- Qualified general contributions (by states, tribal governments, or 501(c)(3) organizations)
- Pilot program contributions (one-time $1,000)
- Employer contributions ($2,500 per employee)
Excess contributions trigger a 6% excise tax. When withdrawn, the excess amount is not taxable—but earnings on that excess are 100% taxable.
After your child turns 18, the Trump Account follows the same tax rules as a regular traditional IRA. Here’s what that means:
- The money inside the account continues to grow tax-deferred.
- Amounts that came from certain contributions you (or other individuals) made with after-tax money during childhood generally are not taxed again when withdrawn.
- Amounts that came from growth inside the account, or from contributions that didn’t give your child any “basis” (for example, government pilot contributions, qualified general contributions, or employer contributions), are taxable when withdrawn.
If your child takes money out before age 59½, there may also be a 10% early withdrawal penalty, unless an exception applies.
What Expat Families Should Know
Families living abroad can open and use Trump Accounts in the same way as families in the United States. The process and rules do not change based on where you live. The only requirements are that the child has a Social Security number and meets the normal eligibility rules.
The parent or guardian will act as the account’s responsible party, even if residing overseas, and all ongoing management — including elections, contributions, and investment choices — can be handled from abroad.
Trump Accounts are fully location-neutral. As long as the child qualifies, the family’s country of residence does not affect access to the account or how it operates.
Full details are available in IRS Notice 2025-68.
If you’re living abroad and need help with your US taxes, our Expat Tax Package includes the most common expat forms—such as FBAR and Form 8938—for one flat fee.
Common Questions
Does my child need earned income to receive contributions?
No. During the childhood “growth period,” contributions do not require the child to have earnings. This is one of the key differences between Trump Accounts and regular traditional IRAs. Personal contributions, employer contributions, and eligible exempt contributions may all be made even if the child has never worked.
Can family members or others contribute to the account?
Yes. Anyone may contribute, as long as total non-exempt contributions for the year do not exceed the $5,000 limit. This means parents, grandparents, relatives, or even family friends may add funds on the child’s behalf. Exempt contributions—such as qualified general contributions or the $1,000 pilot program—do not count toward this limit.
Can families living abroad open and manage these accounts?
Yes. Trump Accounts are designed to work the same way no matter where the family lives. As long as the child has a Social Security number and meets the eligibility rules, the account may be opened and managed from outside the United States. Residence outside the U.S. does not limit access to the account or change how the rules apply.
How long is the federal $1,000 pilot contribution available?
The Treasury contribution applies only to eligible children born from 2025 through 2028. To receive it, the taxpayer must elect both to open the account and to receive the $1,000 deposit. The election can be made anytime before the child turns 18, but no funds may be added to the account until mid-2026, when contributions officially begin under the law.
Do employer contributions follow the same rules?
Employer contributions are permitted through a qualifying Trump Account Contribution Program. These amounts are not taxable to the employee but do count toward the annual $5,000 contribution limit. Employers may contribute up to $2,500 per year, with inflation adjustments beginning in 2028.
What happens to the account once my child becomes an adult?
On January 1 of the calendar year the child turns 18, the special childhood rules end automatically. From that point forward, the account operates under the normal rules for traditional IRAs. The child becomes the account owner, contributions require earned income, and future withdrawals follow standard IRA tax treatment.
This article is for education only and is not tax or legal advice. Always consult a qualified tax professional regarding your personal situation.