How Trump accounts for kids will work and more key details following Dell donation

Trump accounts are a new type of tax-deferred investment vehicle for U.S. children, established under President Trump’s “big, beautiful bill” tax and spending legislation. These accounts offer a $1,000 seed contribution from the federal government for eligible kids. Here’s everything you need to know about Trump accounts, including who qualifies, how to set one up, and how they stack up against other savings plans for children.

Who is eligible for a Trump account?

According to the Department of the Treasury, children who are U.S. citizens born between January 1, 2025, and December 31, 2028, are eligible for a Trump Account. Any household income level can open an account, and all eligible accounts receive a one-time $1,000 contribution from the U.S. government. Families with children under 18 can also open accounts, but they won’t receive the government gift. However, parents, friends, employers, and other parties can make tax-free contributions to the account.

How do I open a Trump account?

Parents or guardians must set up and manage the account until the child turns 18. The Treasury Department recommends using IRS Form 4547 to open a Trump account on behalf of a child. This form also allows applicants to request the $1,000 government contribution to the account. The government-funded accounts will launch with a $1,000 contribution from the government, with instructions for activation sent in May 2026.

When can I set up an account?

Families can open a Trump account in early 2026 and start making financial contributions on July 4, 2026, as per the Trump Administration.

How much can I contribute?

Apart from the government’s $1,000 donation, up to $5,000 per child can be deposited into the account annually. Employers can contribute up to $2,500 per year to an employee’s account tax-free, counting towards the $5,000 limit. Contributions from cities, states, tribal governments, and tax-exempt organizations are generally not subject to the $5,000 limit.

Can funds be withdrawn before a child turns 18?

No, funds cannot be withdrawn from a Trump account before the child turns 18, except for specific reasons such as rollovers to another brokerage account or certain rollovers to an Achieving a Better Life Experience account. After age 18, standard IRA withdrawal rules apply.

How will money in a Trump account be invested?

Funds in a Trump account must be invested in authorized investments like mutual funds or exchange-traded funds tracking the S&P 500 index. Financial firms managing the funds cannot charge more than 0.1% in annual fees.

Should I personally invest in the account?

Financial experts suggest accepting the government’s $1,000 contribution but considering other savings plans like a 529 plan or custodial brokerage account for better financial advantages. While Trump accounts offer tax-free earnings growth, other accounts may provide more benefits and flexibility.

How do Trump accounts compare to a 529 savings plan?

For college savings, a 529 plan may be a better alternative due to tax-free savings for education expenses and transferability to an IRA. Trump accounts have more restrictions and complicated rules, making them less attractive as an overall investment vehicle. 529 plans have penalties for non-education expenses, but Trump accounts offer more flexibility for beneficiaries to use funds for various purposes beyond education.

In conclusion, Trump accounts provide a unique opportunity for children to save and invest for the future, with a $1,000 government contribution as a significant incentive. However, it’s essential to weigh the benefits and limitations of these accounts against other savings plans to make the most informed decision for your child’s financial future.