Families looking for long-term, tax-advantaged ways to help children build wealth now have a new option to consider. The One Big Beautiful Bill Act (OBBBA) introduced Trump Accounts (TAs), a savings vehicle designed to encourage early investing and long-term financial security for children. While the rules are specific, the potential benefits — including free government funding for some families — make these accounts worth a closer look.

Who’s eligible?

Under a pilot program, U.S. citizen children born between 2025 and 2028 are eligible for a TA funded with $1,000 from the federal government. This contribution is automatic once the account is properly established.

Children with Social Security numbers and under age 18 at the end of the tax year are also eligible for TAs, even if they were born before 2025. However, these older children aren’t eligible for the $1,000 government contribution.

How to open a TA

TAs can be opened by submitting Form 4547, “Trump Account Election(s).” The form can be included with 2025 federal income tax returns, but don’t worry if you filed without it. Taxpayers can also file the election independently through an online portal at trumpaccounts.gov.

Beginning July 4, 2026, parents and other individuals, such as grandparents, can make annual contributions. The combined contribution limit is $5,000 per year until the child turns 18, with inflation adjustments beginning in 2028. Importantly, the $1,000 government contribution doesn’t count toward this annual limit.

For example, if your child was born in 2025, up to $5,000 could be contributed in 2026, in addition to the $1,000 government-funded deposit.

The account’s earnings can grow tax-deferred as long as they remain invested, but individual contributions aren’t tax-deductible. Generally, no distributions are allowed before the child turns 18. Until then, investments are limited to eligible mutual funds or exchange-traded funds that track a qualified index, don’t use leverage, charge fees of no more than 0.1% and meet additional IRS requirements.

Other ways to fund an account

Another feature of TAs is that employers can make contributions on behalf of eligible workers under age 18 or employees’ eligible dependents. Beginning July 4, 2026, employers can contribute (and deduct) up to $2,500 annually (adjusted for inflation starting in 2028) for an eligible employee under age 18 or for an employee’s eligible minor dependent. These amounts are excluded from the employee’s taxable income but count toward the account’s $5,000 annual contribution limit. Even if an employee has more than one qualifying dependent, the employer’s total contribution per employee can’t exceed $2,500.

Additionally, state, local or tribal governments and tax-exempt 501(c)(3) organizations can make tax-free “qualified general contributions” under rules to be established by the IRS. These contributions aren’t subject to the $5,000 annual limit and must be provided uniformly to children within a defined group.

Turning 18? What changes

The TA automatically converts to a traditional IRA in the year the child turns 18. At that point, traditional IRA rules apply. Future contributions require earned income and may be deductible, subject to eligibility. Also, the higher IRA contribution limits apply.

Distributions can begin at age 18, but they’re generally taxable and may be subject to early withdrawal penalties. In most cases, letting the account continue to grow tax-deferred offers the greatest long-term benefit.

Review your options

TAs may be worth considering, but it’s important also to review other tax-advantaged savings strategies that may better meet your needs. For example, if your primary goal is education funding, a Section 529 plan, which offers tax-free distributions for qualified education expenses and potential Roth IRA conversion opportunities later, could be a better fit. Contact us for help evaluating your options.