Trump accounts explained: Eligibility, contribution limits, tax benefits for parents

Trump accounts explained: A new savings scheme introduced under last year's tax bill, referred to as “Trump accounts”, is designed to help families start building wealth for children from birth. These accounts sit alongside existing tax-advantaged options such as individual retirement arrangements (IRAs) and 529 plans, but offer different contribution rules, investment limits, and access rules.

For parents, the appeal lies in the early start and long-term compounding potential, as withdrawals are not permitted until the child turns 18. Here's how the savings scheme works.

How can you set up an account?

Trump accounts are expected to become available starting in July 2026. According to IRS guidance, parents can set up these accounts by submitting IRS Form 4547 or through an online application at trumpaccounts.gov.

A key feature of the Trump account is the “growth period,” which begins at the account holder's birth and ends on 31 December of the year before the child turns 18. Though contributions are allowed during this period, investments are restricted. Distributions are also prohibited before maturity, according to a report by the Centre of Retirement Research.

How many contributions are allowed annually?

Beginning 4 July 2026, contributions in a particular account can be made by employers, a state or nonprofit, or family members of the holder, including parents and grandparents. Individuals or entities can contribute up to $5,000 per year.

The annual limit for employers is set at $2,500, which counts toward the $5,000 limit. Meanwhile, contributions from charitable organisations and governments are not subject to the $5,000 annual limit.

The tax treatment of contributions to Trump accounts depends on who makes them. Contributions made by individuals, such as parents or relatives, are typically made on an after-tax basis, meaning they do not qualify for an upfront tax deduction. In contrast, contributions from employers or other entities are on a pre-tax basis, offering potential tax advantages at the time of contribution.

A notable provision for parents of newborns is the pilot contribution, which is a one-time $1,000 contribution (if elected) for eligible children born from 2025 through 2028. This government-funded seed contribution is only given to families with qualifying children.

During the “growth period,” assets must be held in mutual funds or ETFs that track an index of primarily US companies and have expense ratios below 0.10%. These rules limit fees and speculative strategies but also restrict broad diversification, the report said.

When can you withdraw the funds?

The funds in these accounts remain locked until the beneficiary turns 18, after which the accounts convert to traditional IRA treatment for tax purposes, per the report.

Employer contributions of up to $2,500 annually don’t count as taxable income to the employee, subject to the overall $5,000 annual contribution cap, which is indexed to inflation.

Who is eligible for the Trump account tax benefits?

In order to be eligible for the pilot contribution by the government, children must meet the following conditions:

• Be under age 18: The child must be born between 2025 and 2028 to be eligible for the one-time $1,000 government pilot contribution.
• Be a US citizen: In order to be eligible, the child must be a citizen of the United States.
• Social security number: The child must also have a valid Social Security number to be eligible for the program.
• No other programs: The child should not have any prior pilot program elections made on their behalf.

The same Form 4547 is used both to open a Trump account and to request participation in the pilot program contribution, streamlining the overall process for applicants. Importantly, while the election to participate can be made when filing taxes, regulations clarify that it is not technically part of the tax return itself. This distinction means the process remains separate from standard tax filings, even if it is completed around the same time.