Understanding the New “Trump Accounts”: A Parent’s Guide to Eligibility, Funding, Benefits, and Rules

The Department of the Treasury and the IRS have released official guidance on Trump Accounts, a newly created type of individual retirement account (IRA) designed to help children begin building long-term wealth. These accounts were introduced as part of the Working Families Tax Cuts, and while contributions cannot begin until July 4, 2026, families can begin preparing now.

Below is a comprehensive overview of how Trump Accounts work, who qualifies for the federal seed contribution, how to fund the account, and what families should expect from an investment and tax standpoint.

What Is a Trump Account?

A Trump Account is a specialized IRA created for children who are under age 18 during the year the account is established. Parents or guardians make the election on behalf of the child using the new Form 4547, which the IRS has released in draft version.

Once a child turns 18, the Trump Account automatically becomes a traditional IRA and is subject to standard contribution, withdrawal, and taxation rules. Contributions cannot be made before July 4, 2026.

How to Claim the Federal “Free Money”

There are two possible early-funding programs for eligible children:

1. The $1,000 Federal Pilot Program Contribution

Children born between January 1, 2025, and December 31, 2028 may receive a one-time $1,000 seed deposit from the Department of the Treasury. Key points:

• No income limits apply.

• Every eligible child qualifies if Form 4547 is filed.

• Funds will not be deposited before July 4, 2026.

2. The $250 Dell Family Grant

Children who do not qualify for the $1,000 federal contribution may be eligible for a $250 private grant if:

• They were born before 2025,

• Are age 10 or younger, and

• Live in a ZIP code with a median income of $150,000 or less.

No separate form is required for this contribution, and the program may expand to children older than 10 if funds remain available. Because only about 3% of U.S. ZIP codes exceed the income threshold, most families will qualify geographically.

Contribution Rules: How Much Can You Add Each Year?

Beginning July 4, 2026, families can contribute up to $5,000 per year per child in after-tax dollars until the year before the child turns 18. This limit will adjust for inflation starting in 2028.

Employer Contributions

• Employers may contribute up to $2,500 per year per employee or dependent.

• Employer contributions do not count as taxable income to the employee.

• They are included in the $5,000 annual limit.

Government and Charitable Contributions

Certain public entities and charities may make qualified general contributions that do not count toward the annual limit, provided they contribute to a defined class of beneficiaries.

Investment Options: What Can a Trump Account Hold?

Investment options are intentionally limited to broad U.S. equity index funds, such as mutual funds or ETFs. These funds must:

• Track a qualified index (definition pending further guidance),

• Avoid the use of leverage, and

• Maintain expense ratios below 0.10% annually.

Morningstar estimates that approximately 186 existing funds may meet these criteria.

The restriction is designed to provide simple, low-cost, diversified access to U.S. equity markets.

Withdrawal and Rollover Rules

Before Age 18

Withdrawals are not permitted except in limited cases:

• Trustee-to-trustee transfers,

• Certain rollovers to an ABLE account during the year the child turns 17 (for qualifying individuals),

• Refunds of excess contributions,

• Distribution due to death.

After Age 18

The account becomes a traditional IRA, and standard rules apply:

• Withdrawals before age 59½ are generally taxable and subject to a 10% penalty, unless an exception applies (higher education expenses, first-home purchase, etc.).

Final Thoughts

Trump Accounts represent a new opportunity for families to begin retirement savings on behalf of their children, with potential early contributions from the federal government or philanthropic sources. The required use of low-cost U.S. equity index funds, combined with long time horizons, supports the program’s goal of widening participation in long-term investing—especially for households that may not otherwise have market exposure.

As the IRS continues to release additional regulations and finalize Form 4547, more details will become available. Families considering a Trump Account should stay informed and evaluate how this new account type fits within their overall financial plan.

If you would like help understanding how a Trump Account may complement your family’s investment or education-planning strategy, our team at Whitener Capital Management is here to help.