Funding officially opened on July 4, 2026 for Trump Accounts, the new child savings program created under the One Big Beautiful Bill Act (OBBBA) and codified in the tax code as Section 530A. If you have kids or grandkids under 18, or you’re expecting a child in the next few years, here’s everything you need to know before you decide whether to open one.

What Is a Trump Account?

A Trump Account is essentially an IRA for children. It’s a tax-advantaged investment account opened for the exclusive benefit of a child under 18, and it behaves like a Traditional IRA in almost every respect once the child turns 18 — including how it’s taxed on the way out.

Two things separate it from a normal IRA. First, the child doesn’t need earned income for someone to contribute, which is required for a standard IRA. Second, contributions are never tax-deductible, no matter who makes them.

Who Is Eligible?

Any child under 18 with a valid Social Security number can have a Trump Account opened in their name. There’s no income limit and no citizenship requirement beyond having a valid SSN.

A separate, narrower rule applies to the $1,000 government seed money. To get it, the child must:

• Be born between January 1, 2025 and December 31, 2028
• Be a U.S. citizen
• Have a valid Social Security number
• Be claimed as a qualifying child by the person opening the account

That $1,000 is a one-time federal deposit and doesn’t count against the account’s annual contribution limit.

How to Open One

The account is established by filing Form 4547 (Trump Account Election), which can be submitted three ways: e-filed along with a federal tax return, mailed as a paper form to the IRS, or submitted electronically through the parent’s IRS Individual Online Account. If you claimed a child on your 2025 return, you may have already filed it. If not, there’s no rush — you can file Form 4547 for an eligible child any time before the year they turn 18.

Contribution Rules

• Annual limit: $5,000 per year for 2026 and 2027, indexed for inflation starting in 2028.
• Who can contribute: Anyone — parents, grandparents, other family, friends, employers, and even nonprofits. There’s no earned income requirement for the child or the contributor.
• Contribution deadline: December 31 each year, same as a calendar-year retirement account.
• Employer contributions: Employers can contribute up to $2,500 per employee per year (combined across all of that employee’s children) tax-free to the employee. This is a new fringe benefit under Section 128 of the tax code. Employer contributions count toward the $5,000 family limit, not on top of it.
• What doesn’t count against the limit: The $1,000 government pilot contribution, contributions from tax-exempt organizations and governments, and qualified trustee-to-trustee rollovers.

Where the Money Goes

Unlike a Custodial Account or a self-directed IRA, you don’t get to choose the investments. Trump Account funds must be held in a diversified fund tracking a U.S. equity index like the S&P 500. There are no bond options, no target-date funds, and no ability to pick individual stocks during the growth period. This keeps the accounts simple, but it also means there’s no way to dial down risk as the child approaches 18.

Tax Treatment

Contributions go in after-tax — there’s no deduction for the contributor, ever. The account then grows tax-deferred, similar to a Traditional IRA. When money eventually comes out, the after-tax contributions you put in are not taxed again, but everything else — investment growth, the $1,000 seed money, and any employer or third-party contributions — is taxed as ordinary income under IRA distribution rules (a pro-rata calculation determines how much of each withdrawal is taxable).

Access and Withdrawal Rules

The money is locked up completely until the child turns 18 — no early access for education, emergencies, or anything else during childhood. On January 1 of the year the child turns 18, the account automatically converts into a standard Traditional IRA under their control.

From that point forward, ordinary IRA withdrawal rules apply. Distributions before age 59½ are taxed as ordinary income and hit with a 10% early withdrawal penalty, unless an exception applies:

• Qualified higher education expenses
• First-time home purchase (up to $10,000)
• Birth or adoption expenses (up to $5,000)
• Disability or terminal illness
• Certain unreimbursed medical expenses

Rollovers

You can move a Trump Account from one custodian to another via a trustee-to-trustee transfer, as long as the full balance moves to another Trump Account for the same child — partial transfers aren’t allowed, and the transfer itself isn’t a taxable event. As of now, there’s no mechanism to roll money from a 529 plan, UTMA/UGMA account, or Coverdell ESA into a Trump Account. Once the account converts to a Traditional IRA at 18, standard IRA rollover rules take over.

Trump Account vs. Custodial Account (UTMA/UGMA)

This is the comparison most clients will actually face, since a Custodial Account is the closest existing alternative.

Neither one is strictly better. The Trump Account wins on free money and FAFSA treatment. The Custodial Account wins on flexibility, access, and often on the tax rate applied to growth.

Trump Account vs. 529 Plan

If the goal is funding college, a 529 plan is still the stronger tool. 529 withdrawals are tax-free when used for qualified education expenses, there’s no lockup until 18, and most states offer a tax deduction or credit for contributions. A Trump Account offers none of that — withdrawals for education before 59½ still trigger ordinary income tax on the taxable portion, even though the early withdrawal penalty is waived. The two aren’t mutually exclusive; many families will end up using both, plus a Custodial Account, depending on the goal for each dollar.

Is It Worth Opening One?

If you have a child born between 2025 and 2028, yes — file Form 4547 and claim the free $1,000. There’s no real downside to accepting free money that grows tax-deferred for close to two decades.

Beyond the seed money, whether to keep funding a Trump Account depends on what you’re saving for. If the money is for retirement-style, hands-off, long-horizon growth you won’t touch until the child is an adult, the Trump Account works fine, and the mandatory S&P 500 exposure isn’t a bad default for an 18-year time horizon. If you’re saving for college, a first car, or anything the child might need access to before 59½, a 529 plan or Custodial Account will generally serve the family better.

Bottom Line

Open the account, claim the $1,000 if your child qualifies, and treat anything beyond that as one more tool in a broader savings plan rather than a replacement for a 529 or Custodial Account. If you want help deciding how a Trump Account fits alongside what you’re already doing for your kids or grandkids — college savings, custodial accounts, or your own retirement contributions — talk to your Molen & Associates advisor. This is exactly the kind of decision worth mapping out before you fund it.

Sources: IRS — Trump Accounts, IRS Form 4547 Instructions, IRS Newsroom — Trump Account elections, IRS Notice 2025-68, TrumpAccounts.gov, Congress.gov — Trump Accounts: Overview and Policy Considerations, Charles Schwab — What to Know About Trump Accounts, Fidelity — Trump Accounts vs. 529s, UTMA/UGMAs, and Roth IRAs, The College Investor — How Employers Can Contribute $2,500 to Trump Accounts, TurboTax — What Are Trump Accounts? 2026 Tax Guide & Enrollment FAQ, WSJ — The Pros and Cons of Putting Extra Dollars in a Trump Account

Note: Trump Accounts are a brand-new program and the IRS is still finalizing regulations. Some details — particularly around rollovers and employer contribution mechanics — may change. Confirm current rules before making contribution decisions, especially near year-end deadlines.