Trump Accounts: A Guide to Saving for Your Child’s or Grandchild’s Future

Trump Accounts decoded for parents or grandparents. Learn about tax benefits, growth potential, and how to start saving for your child’s financial future, even with small contributions.

You’ve heard the whispers about ‘Trump Accounts’—a new way to save for your child’s future—and you’re probably wondering what all the fuss is about. Are they just another complex financial product, or a genuine game-changer for parents? Let’s clear up the confusion and explore how these accounts can truly save you money, step by simple step.

Understanding how money flows into your Trump Account is key to grasping its benefits. Let’s break down the five primary sources that can fund the account during the growth period (which is defined as the time between opening the account and the year before your child turns 18):

A Free Kickstart from Uncle Sam. This is the exciting “seed money” you’ve heard about—a one-time $1,000 deposit straight from the government for eligible kids born between January 1, 2025, and December 31, 2028. As long as your child is a U.S. citizen with a Social Security number and you make the election (using IRS Form 4547 or online at trumpaccounts.gov), this hits the account tax-free and doesn’t count against any limits. It’s like free money to jumpstart growth—no strings attached beyond the basics.

Boosts from States, Charities, or Tribes. These come from bigger players like your state government, Indian tribal organizations, the District of Columbia, or tax-exempt nonprofits under section 501(c)(3). They’re funded for groups of kids in a “qualified class” (think community programs or targeted initiatives), and they pour in without creating taxable basis in the account. No annual cap here, so if your child qualifies for something like a state-sponsored savings match, it can supercharge the balance effortlessly.

If your employer offers contributions under section 128 (up to $2,500 per employee per year for you to share between your dependent children—not $2,500 per dependent), it’s a win-win. For clarity, if you have three children, the employer can contribute a total of only $2,500 (presumably shared across your eligible children’s Trump accounts), not $2,500 per child. This $2,500 ( adjusted for inflation after 2027) aren’t included in your taxable income as the parent, saving you money upfront (e.g., about $300 in taxes if you’re in the 12% bracket). These are not “matching” contributions like other employee retirement plans but rather these contributions are provided through a nondiscriminatory program similar to dependent care benefits—perfect for padding the child’s account without at all dipping into your pocket. Also, if a second parent has an employer who were to contribute up to $2,500, it is conceivable that employer contributions could reach the $5,000 annual contribution limit.

Qualified Rollover Contributions are seamless transfers between Trump accounts. For example, if you moved a Trump account from one broker to another (technically called a trustee-to-trustee transfer) where the full balance is transferred, all existing basis carry over without taxes hitting at the time. No limits apply, making a change in a broker a smooth event that keeps everything optimized without starting over.

This covers money a parent, the child themselves, or even grandparents and friends—up to $5,000 per year minus any employer contributions because the maximum contribution is $5,000 (adjusted after 2027). These are made with after-tax dollars (no upfront deduction), but they create basis in the account, meaning the original amount can come out tax-free later. Even small amounts add up, and unlike regular IRAs, your kid doesn’t need any income to qualify.

Now that you understand how money flows into these accounts and where the tax advantages lie, let’s look at the real impact of that tax-deferred growth over the long term. Seeing the numbers often brings the ‘magic’ to life.

Understanding how the value of the account can grow is key to grasping its benefits. Let’s break down the three most likely sources of account value change you’ll probably see annually:

As a parent, grandparent, or friend, when you contribute your own funds (up to $5,000 per year), you’re typically using money you’ve already paid taxes on.

Simple Example:

• You earn $50,000 at your job, but payroll taxes reduce your actual income to about $46,000.
• You pay income taxes on that effective $46,000 in income. This equates to about another $4,000 in Federal Income Tax leaving you with about $42,000 after tax.
• Then, you decide to put some amount of cash, up to $5,000, into a Trump Account using your after-tax dollars.
• The truth: Whether you invest that $5,000 in a Trump Account or a regular, taxable investment account, you face the same upfront tax situation. So, no immediate tax benefit here to you as the parent, grandparent, or friend.

If your employer contributes to a dependent child’s account (up to $2,500 per year per employer—adjusted for inflation after 2027), this is where you see immediate tax savings.

Example: If your employer adds $2,500 and you’re in the 12% federal tax bracket, in addition to the $2,500, you effectively save about $300 in federal taxes that year. This is because these employer contributions are not counted as part of your taxable income for the year. This $2,500 is tax-free without any tax liability.

This is truly where Trump Accounts offer a significant advantage. Your investments grow within the account, and you don’t pay taxes on those gains year after year. All dividends from investments are not taxed. Instead, taxes are deferred; you only pay them when you withdraw the money. On January 1st of the year the child turns 18, the Trump Account becomes a traditional IRA under section 408 rules. Distributions can be left in the account beyond 18 subject to IRA rules, such as required minimum distributions starting at age 73, early withdrawal penalties before age 59 unless qualifying for exceptions like higher education, first-home purchases, etc.

Why This Matters:

• Regular Investment Account: Uncle Sam taxes your capital gains or dividends each year, slowing down your compounding.
• Trump Account: Your investment gains compound entirely tax-free for years, accelerating your child’s wealth building until withdrawal.

Now that you understand how money flows into these accounts and where the tax advantages lie, let’s look at the real impact of that tax-free growth over the long term. Seeing the numbers often brings the ‘magic’ to life.

Of course, markets aren’t always smooth sailing—there can be corrections, recessions, or even the rare depression that might temporarily dip the value of your Trump Account’s investments. But remember, these accounts are built for the long game, tracking broad U.S. indexes like the S&P 500 through low-cost funds. As Warren Buffett wisely puts it, “The stock market is a device for transferring money from the Active to the Patient.” Over an 18-year horizon, historical trends show the U.S. market has consistently grown despite short-term blips, so you can reasonably expect your child’s savings to build steadily toward a brighter financial start.

To truly illustrate the power of these accounts, let’s compare two hypothetical families, each consistently saving $5,000 per year for 18 years:

• Family A (Utilizing a Trump Account):
  • Invests $5,000 per year for 18 years = $90,000 total personal contributions.
  • After 18 years, assuming a consistent 7% annual growth rate: ~$192,000
  • Their total investment gain: $102,000 (This gain is realized before any taxes are paid upon withdrawal.)
• Family B (Using a Regular, Taxable Investment Account):
  • Invests $5,000 per year for 18 years = $90,000 total personal contributions.
  • After 18 years, assuming the same 7% annual growth rate (assuming capital gains tax on gains and qualified dividends each year): ~$155,000
  • Their total investment gain: $65,000

The Compelling Difference: Family A ultimately accumulates approximately $37,000 more than Family B. This significant difference highlights the benefit of tax-deferred growth, allowing more of your money to compound over time. Please be aware that Trump Account growth is taxed at ordinary income tax rates when pulled out rather then potentially lower capital gains rates and and this difference could affect the child’s income tax bracket when withdrawals are made, even for qualifying expenses such as education, home-buying, medical expenses, etc.

Basis is a term in accounting and taxation that simply means what you originally paid for something, like a stock, house, or other asset. It’s your “starting point” for figuring out whether you made or lost money when you sell it. For example, if you buy a stock for $1,000 (your basis) and sell it later for $1,500, you only pay income taxes on the $500 profit—not the full $1,500 selling price. In short, basis helps determine your actual profit and, therefore, how much income tax you owe when you sell an asset.

When certain money goes into a child’s Trump account, it creates tax basis so that, when those specific dollars come out later, that portion will not be taxed again. During the “growth period” (before January 1 of the year the child turns 18), some contributions create basis and some do not.

• Contributions from parents, grandparents, friends, or from the child directly create basis in the Trump account.
• When money is rolled from one Trump account to another, or from a Trump account to a traditional IRA, any existing basis carries over with it and is not lost.

By contrast, the government’s onetime pilot $1,000 Trump account contribution, the “Dell contribution”, any other future contributions funded by federal, state, or local governments or qualifying charities, and employer contributions (as discussed earlier) do not create basis at all.

Basis becomes especially important after the growth period, when Trump accounts generally follow the normal traditional IRA distribution rules. If the child later rolls the Trump account into a traditional IRA or takes IRA distributions for allowed purposes like college costs or a first home, the portion of any withdrawal tied to basis (for example, earlier gifts from parents and grandparents) can come out taxfree, while investment earnings and nonbasis contributions are taxable. Carefully tracking which dollars came from family and friends versus government funding or employer programs helps avoid being taxed twice on the same money and helps families plan how much will really be available after taxes when the child eventually uses the funds.

Previously, we discussed contributions made under a section 128 Trump account contribution program. The issuance of IRS Notice 2025-68 appears to allow employer contributions to a Trump accounts through a cafeteria plan (a section 125 plan), as long as the contributions go to a dependent child’s Trump account, not the employee’s own account. The IRS has indicated that more detailed guidance is coming on exactly how these cafeteriaplan contributions will work with Trump accounts, but the basic idea is that salaryreduction elections that are permitted to fund a child’s Trump account can still help build that child’s future retirement or education nest egg. Employers and families should watch for future IRS updates so they can make the most of this new option once the rules are finalized.

Previously, we discussed contributions made under a section 128 Trump account contribution program. The issuance of IRS Notice 2025-68 appears to allow employer contributions to a Trump accounts through a cafeteria plan (a section 125 plan), as long as the contributions go to a dependent child’s Trump account, not the employee’s own account. The IRS has indicated that more detailed guidance is coming on exactly how these cafeteriaplan contributions will work with Trump accounts, but the basic idea is that salaryreduction elections that are permitted to fund a child’s Trump account can still help build that child’s future retirement or education nest egg. Employers and families should watch for future IRS updates so they can make the most of this new option once the rules are finalized.

Deciding whether a Trump Account aligns with your family’s financial goals involves weighing its unique benefits against its limitations and drawbacks. Here’s a clear breakdown:

• Free government “seed money”: A guaranteed $1,000 for eligible children born between 2025 and 2028 as long as you file IRS Form 4547 or apply online at trumpaccounts.gov. Your child must be a U.S. citizen with a valid SSN issued before the election, and no prior election made.
• Potential employer contributions: An invaluable boost to your savings, often at no cost to you.
• 18 years of tax-deferred growth: Your investments grow uninterrupted by annual taxes, maximizing compounding.

• An immediate tax deduction for your personal contributions: Your own contributions are made with after-tax dollars.
• Tax-free withdrawals: You will pay ordinary income tax on the gains, not the principal or basis, when the money is eventually withdrawn. For example, in the previous example of investing a total of $90,000 over 18 years, if your child liquidates the account, the $90,000 basis is not taxed since you already paid income tax on this original amount. Note although not clear at this time typical IRA distributions with basis are required to allocate ratably so that you cannot take basis out first but must do ratably.
  • On January 1st of the year the child turns 18, the Trump Account becomes an IRA. When this occurs, distributions follow traditional IRA rules such as potential 10% penalties for non-qualified early distributions (before age 59½). Qualified distributions (e.g., for higher education, first home up to $10,000) may avoid penalties but still tax gains as ordinary income.

Consider a Trump Account a strong contender if these situations describe you:

• ✅ You have a child born between 2025 and 2028: This makes you eligible for the immediate $1,000 government seed money—a truly free head start.
• ✅ Your employer offers contributions: Don’t pass up free money! Employer contributions are considered a fringe benefit and are not taxed until withdrawn. This is an incredible way to supercharge your child’s savings.
• ✅ Your child is 10 or under: This timeframe allows ample opportunity for investment growth and may qualify for the additional $250 Dell donation if the child resides in a zip code with a median household income below $150,000 and is born prior to 2025 where the child is not eligible for the $1,000 seed money. (check program specifics for details as they are announced further).
• ✅ Cafeteria Plan allows you to fund with after tax contributions and you can afford to fund and set aside until child reaches 18.

While Trump Accounts offer significant advantages, they aren’t the perfect fit for everyone. Consider these points before committing:

• ❌ You’re already maxing out 529 college plans: While Trump Accounts offer great flexibility, 529 plans typically provide more immediate state income tax deductions and tax-free withdrawals when used for qualified education expenses. It’s often strategic to maximize these dedicated education savings first if that’s your primary goal.
• ❌ You anticipate needing this money before your child turns 18: Funds in a Trump Account are generally prohibited until your child reaches adulthood, so ensure you have other liquid savings for emergencies. After turning 18, withdrawals are subject to taxes/penalties according to IRA rules.
• ❌ Your child is already 16-17 years old: With only a couple of years for growth, the full benefit of long-term compounding won’t be realized.

The Trump Accounts program is set to launch in January 2026. You can open or elect to be open an account in early 2026 by filing FORM 4547, but contributions cannot begin before July 4, 2026. Be sure to visit trumpaccounts.gov starting in 2026 to begin the enrollment process.

Even if significant monthly contributions feel out of reach right now, our strong recommendation is to open an account solely to secure that free government seed money if your child was born in the years 2025, 2026, 2027, or 2028. Here’s why this small step has massive potential:

• The Power of $1,000: That initial $1,000, left untouched for 18 years and growing at a conservative 7% annual return, could become approximately $3,400. That’s a sum your child would not have otherwise.

Don’t let the idea of large contributions overwhelm you. The most important step is to start. Even committing $50 or $100 per month consistently can accumulate into a substantial sum over 18 years.

You don’t have to navigate the complexities of tax-advantaged savings alone. Numerous free resources are available to help you understand and manage your Trump Account:

• TrumpAccounts.gov (launches July 4, 2026): The official enrollment portal where you will establish your account.
• IRS.gov/newsroom: Your go-to for official new information and guidelines related to these Trump accounts.
• SSA.gov or call 800-772-1213: Essential for obtaining your child’s Social Security Number, a requirement for account setup.

• VITA (Volunteer Income Tax Assistance): Offers free tax preparation services for families earning under $64,000. Find local assistance at IRS.gov/VITA or call 800-906-9887.
• AARP Tax-Aide: Provides free tax help for low-to-moderate income individuals of all ages. Visit AARP.org/taxaide or call 888-227-7669.

Not sure whether to work with an EA or a CPA? Both are qualified to help with tax-advantaged savings strategies. An Enrolled Agent credential is the most prestigious status awarded by the IRS, and EAs specialize in tax matters. Tax preparers can also demonstrate their competence through programs like the Annual Filing Season Program (AFSP), which requires ongoing education in federal tax law.

Leading tax software providers such as TurboTax, H&R Block, and TaxAct are expected to incorporate guided Trump Account setup features within their 2026 software releases.

Gleim Exam Prep is the trusted leader in accounting and certification exam preparation, founded in 1974 by Dr. Irvin N. Gleim when he authored the industry’s first self-study CPA review book. With over 50 years of innovation, Gleim has helped millions of candidates pass the CPA, CMA, CIA, EA, and other professional exams—making us the #1 choice for accounting and tax prep and a preferred provider for organizations like the National Association of Tax Professionals (NATP). Our comprehensive, up-to-date review courses, professor-led materials, and industry-leading test banks are designed by accounting educators and used by top universities worldwide. Choose Gleim for proven, expert-guided preparation that maximizes your chances of passing on the first attempt.

For Tax Professionals: Stay current on tax-advantaged savings vehicles like Trump Accounts. Gleim offers CE packages for Enrolled Agents that cover individual taxation topics, including IRAs and education savings. Interested in a rewarding career helping families navigate tax strategy? Discover the top reasons to become an Enrolled Agent.

Disclaimer:

The following information is not intended to be written advice concerning Federal tax matters subject to the requirements of Treasury Department Circular 230.

The information that follows is general in nature and is not intended to apply to any individual or entity’s particular circumstances. Although the information provided is intended to be timely and accurate, we cannot guarantee its accuracy on future dates. No individual or entity should act on this information without the advice of a professional and careful consideration of the particular circumstances.

This was published on December 19, 2025 and the information below may become inaccurate with changes in laws, regulations, and the promulgation of laws.

This Article was reviewed by Garrett Gleim

Garrett W. Gleim, CPA, CGMA, leads production of the CPA, CMA, CIA, and EA exam review systems at Gleim. He holds a Bachelor of Science in Economics with a concentration in Accounting from the Wharton School, University of Pennsylvania. He is a member of the American Institute of Certified Public Accountants (AICPA) and the Florida Institute of Certified Public Accountants (FICPA). Also an active supporter of the local business community, Garrett serves as an adviser to several startups. He is an avid pilot and is certified as a flight instructor and commercial pilot.