The One Big Beautiful Bill Act of 2025 created a new type of savings account for children known as a Trump account. A Trump account is a special type of individual retirement account (IRA) established under IRC § 530A for eligible children. In general, these accounts operate similarly to traditional IRAs, but they are subject to a unique set of rules before the child reaches adulthood and cannot be designated as Roth IRAs.

Trump accounts are designed to encourage long-term investing from an early age. Contributions may begin on July 4, 2026, although because that date falls on a Saturday, financial institutions may not begin accepting contributions until July 6, 2026. These accounts may provide children with an opportunity to build wealth through long-term investment growth, family contributions, employer contributions, and, for certain children, a one-time federal pilot program contribution.

Government Contribution

For certain children born in 2025 through 2028, the federal government will make a one-time $1,000 pilot program contribution to a Trump account, provided the required election is made. More specifically, the contribution is available for an eligible individual born after December 31, 2024, and before January 1, 2029.

To qualify, the child generally must be a U.S. citizen, be under age 18 at the end of the applicable calendar year, and have a valid Social Security number issued before the account is opened. If the election to open the account and request the $1,000 pilot program contribution is made at the same time, the authorized individual must be a pilot program-electing individual, generally someone who anticipates that the child will be their qualifying child under IRC § 152(c) for the election year.

Importantly, the $1,000 contribution is not automatic for all children in the eligible birth window. The required election must be made by filing Form 4547, Trump Account Election(s), or by using an electronic application made available by the IRS. Form 4547 may be submitted with an e-filed tax return, separately through an IRS online account, through the official Trump Accounts app, or by paper filing.

Authorized Individuals and Account Setup

Only an authorized individual may elect to establish a Trump account for an eligible child. The identity of the authorized individual depends on whether the election is solely to open an account or is also requesting the $1,000 pilot program contribution.

If the election is only to open an initial Trump account, authorized individuals generally include, in priority order, the child’s legal guardian, parent, adult sibling, or grandparent.

If the election also requests the $1,000 pilot program contribution, the authorized individual must meet the pilot program-electing individual requirements discussed above.

Once the IRS processes the election, the Treasury Department will send information to the authorized individual to activate the account. The account activation process generally requires authentication, after which the authorized individual can complete the opening of the initial Trump account. To prevent multiple initial accounts from being opened for the same child, only the first election processed by the IRS will result in an initial Trump account being opened.

Family Member and Individual Contributions

Family members and other individuals may contribute to a child’s Trump account during the account’s growth period. The general annual contribution limit is $5,000 per child, adjusted for inflation after 2027.

While multiple individuals may contribute, combined non-exempt contributions cannot exceed the annual $5,000 limit. However, qualified rollover contributions, qualified general contributions, and the $1,000 federal pilot program contribution under IRC § 6434 are excluded from this limit.

Unlike regular IRA contributions, contributions to a Trump account during the growth period do not require the child to have earned income. Contributions for years before the calendar year in which the child turns 18 generally must be made by December 31 of the applicable year; the regular IRA rule allowing contributions by the tax return due date does not apply during this period.

Employer Contributions

Employers may also contribute to Trump accounts under a qualifying employer program. Under IRC § 128, employer contributions to a Trump account may be excluded from an employee’s gross income up to $2,500 per employee, adjusted for inflation after 2027, if the contributions are made under a qualifying separate written Trump account contribution program.

The $2,500 exclusion limit is applied per employee, not separately for each dependent. Employer contributions also count toward the overall $5,000 annual Trump account contribution limit, unless another exclusion applies.

To qualify, the employer must adopt a separate written plan that satisfies requirements similar to certain dependent care assistance program rules under IRC § 129(d). Employers considering this benefit should work with their tax and benefits advisors to confirm the plan document, nondiscrimination, reporting, and payroll treatment requirements.

Growth Period and Tax Treatment

The growth period for a Trump account begins on the date the account is opened and ends on December 31 of the year before the calendar year in which the account beneficiary turns age 18.

During the growth period, investment earnings are generally tax-deferred. No tax is due on account earnings while funds remain in the account. However, Trump accounts are not Roth accounts, and distributions are generally taxed under rules similar to those applicable to traditional IRAs.

For distribution purposes, family and friend contributions generally are treated as nondeductible contributions and may create basis in the account. By contrast, employer contributions, the initial $1,000 government payment, and certain government or charitable contributions do not create basis when determining the taxable portion of a distribution.

Eligible Investments

During the growth period, Trump account funds must be invested in eligible investments. Eligible investments generally are limited to mutual funds or exchange-traded funds that meet specific statutory requirements under IRC § 530A(b)(3).

Eligible funds must track the returns of a qualified index (such as the S&P 500 or another index composed primarily of U.S. companies), must not use leverage, must not have annual fees and expenses exceeding 0.1% of the investment balance, and must meet any other criteria established by Treasury.

A qualified index may include the S&P 500 or another qualifying U.S. equity index, but it may not be an industry- or sector-specific index. Once the beneficiary turns 18, the special pre-age-18 investment restrictions no longer apply, and the account may generally be invested in the same manner as other IRA funds.

Distributions

Trump account distributions generally are prohibited before January 1 of the calendar year in which the account beneficiary turns age 18. Limited exceptions may apply during the growth period, including certain qualified rollovers, qualified ABLE rollovers, excess contribution corrections, and distributions following the account beneficiary’s death.

After the growth period ends, the Trump account is generally treated like a traditional IRA. Distributions are generally included in income to the extent they exceed the beneficiary’s basis in the account. Early withdrawals before age 59½ may be subject to the 10% additional tax under IRC § 72(t), unless an IRA penalty exception applies.

Potential exceptions to the 10% early distribution penalty may include distributions used for qualified higher education expenses, first-time homebuyer distributions (subject to the applicable lifetime cap), and other exceptions available under the traditional IRA rules.

Taxpayers should be careful not to assume that every major life expense qualifies for penalty-free treatment. For example, a general distribution to start a business is not automatically a recognized IRA penalty exception unless it independently satisfies an applicable exception under the law.

Roth IRA Conversion

A Trump account cannot be established as a Roth IRA. However, after the growth period, the account may generally be converted or rolled over to a Roth IRA. The conversion is a taxable event to the extent the converted amount would be taxable if distributed, but the conversion itself does not trigger the 10% early distribution penalty.

Beneficiaries should also consider the Roth IRA five-year rules. Withdrawals of converted amounts within five years of conversion may be subject to the 10% penalty in certain circumstances.

Final Thoughts

Trump accounts offer families a structured way to begin investing for a child from an early age. With the potential for a $1,000 federal pilot program contribution, annual contributions from family members and others, and employer participation under a qualifying written plan, these accounts may serve as a valuable component of a long-term savings strategy.

To establish a Trump account, an authorized individual may file Form 4547 or use an IRS-approved electronic election method. After the election is processed, the Treasury Department will provide activation instructions, and the authorized individual generally becomes the responsible party who manages the account on behalf of the child until the child can take control.

As with any tax-favored account, families and employers should review the eligibility rules, contribution limits, investment restrictions, and distribution tax consequences before participating. Please contact your AHP representative to discuss how these accounts may benefit you. Planning ahead can help you maximize your children’s financial situation and position them for greater success.