10 Things to Know About the Trump Savings Account

Denise is hosting a webinar, “Trump Accounts: What Every Advisor Needs to Know,” at 12 p.m. Eastern time on Aug. 21. Register here.

The "One Big Beautiful Bill Act," signed into law on July 4, 2025, created a special savings account for children under the age of 18 called the Trump Savings Account.

The Trump account borrows many of its rules from the traditional IRA but follows unique provisions until the year the child turns 18. At that point, the Trump account is treated like a regular traditional IRA. Before then, it has its own limits, restrictions, and timing rules that parents and guardians must understand.

A Trump account can be funded by a parent or guardian, another individual such as a relative or friend, an employer, the IRS in special circumstances, and an eligible charitable organization. Although contributions may come from several sources, there are strict rules on how much can be contributed each year and when distributions can be made.

Here are 10 things to know about Trump Savings Accounts.

1) Who Owns the Trump Account?

Similar to a 529 plan or an education savings account, the child is the owner of the Trump account and is referred to as the beneficiary. All Trump account rules are designed with the child as the owner.

2) What Type of Accounts Are Contributions Made To?

Contributions to a Trump account can only be made to accounts that follow the traditional IRA framework in the tax code. Employer contributions are not treated like SEP or Simple IRA contributions and therefore do not require the notices or operational procedures associated with those accounts. Funds in a Trump account grow tax-deferred, and any earnings are taxable when withdrawn.

3) Who Can Contribute to a Trump Account and How Much?

A Trump account can receive contributions of up to $5,000 each year from parents, guardians, and other individuals. Employers can contribute up to $2,500 for an employee or the employee’s dependent who is under age 18. The employer’s contribution counts against the $5,000 yearly limit.

The OBBBA also created the one-time $1,000 deposit from the federal government for children born between Jan. 1, 2025, and Dec. 31, 2028. It appears that parents can claim this contribution by filing an election with the IRS. The child must have a Social Security number. The $1,000 deposit doesn’t count against that year’s $5,000 limit.

Besides the $1,000 deposit, certain other government programs and charities may make contributions to eligible classes of children that do not count toward the $5,000 limit.

4) What Are the Contribution Deadlines?

Trump account contributions must be made by Dec. 31 of the contribution year.

In the year the child turns 18, the account becomes a traditional IRA and follows the regular IRA deadline, meaning contributions can be made up to the tax filing due date for that year and after.

5) How Is a Trump Account Invested?

Trump accounts have limited investment options. They may only be invested in mutual funds or exchange-traded funds that track a qualified index, such as the S&P 500. They cannot use leverage. Annual fees cannot exceed 0.1% of the account balance.

6. When Can Distributions Be Made?

Distributions cannot be made before the year the child turns 18, but there are exceptions:

• A distribution of the entire Trump account can be rolled over to another Trump account for the same beneficiary.
• A distribution of the entire Trump account can be rolled to an ABLE account in the year the child turns 17.
• Excess contributions can be returned.
• A distribution can be made upon the death of the beneficiary.

At age 18, normal IRA distribution rules apply, including possible early distribution penalties for distributions before age 59½ unless an exception applies.

7) How Are Distributions Taxed?

The tax treatment of a Trump account depends on the source of contributions.

• Contributions from parents, guardians, and other individuals are not tax-deductible and create the basis in the Trump account that is not taxable when withdrawn.
• Employer contributions, the $1,000 federal contribution, and charitable gifts do not create basis and are taxable when withdrawn.
• Earnings are taxable when withdrawn.

Withdrawals of taxable amounts before age 59½ may also be subject to a 10% early distribution penalty unless an exception applies.

Example: If 40% of the Trump account balance is basis and 60% is taxable amounts, then 40% of any distribution will be nontaxable and 60% will be taxable. The IRS does not allow distribution to be taken solely from basis first.

Only contributions made by parents, guardians, relatives, friends, or the beneficiary create basis in the account. All other contributions and all earnings are fully taxable when withdrawn.

8) What Happens at Age 18?

In the year the child turns 18, the Trump account transitions to following all traditional IRA rules. Contributions to the account from that point on require the child to have eligible compensation.

The Trump account becomes subject to normal IRA rollover, transfer, and aggregation rules, including the one-per-year rollover limit, basis aggregation, and future required minimum distributions.

9) What Are the Reporting Requirements of Trump Accounts?

The financial institution holding the Trump account must send annual reports to both the IRS and the account owner. These reports show contributions (including the source of any contribution over $25 from nonfamily members), distributions, rollovers, account balance, and basis in the account.

These reporting requirements continue until the calendar year in which the child turns 17. After that, the account is reported under the traditional IRA framework.

10) When Can I Start Making Contributions?

Under the law, no Trump account contributions can be accepted until 12 months after enactment of the OBBBA. Therefore, the earliest date contributions can be made is July 4, 2026.

Custodians will need to create Trump account-specific documents and systems to manage the accounts, including the ability to track basis.

Reminder: Watch Out for Penalties

It’s important to remember that penalties might occur when contributions to Trump accounts exceed the annual limit, distributions are taken too early, or deadlines are missed.

If the annual contribution limit is exceeded, the IRS may assess a 6% penalty each year until the excess is corrected. The correction usually involves withdrawing the extra contribution and any earnings.

Withdrawals before the year the beneficiary turns 18 are generally prohibited except for limited exceptions. After age 18, distributions before age 59½ may trigger a 10% penalty unless an exception applies.

Before age 18, contributions must be made by Dec. 31 of the contribution year. In the year the child turns 18 and after, the deadline shifts to the IRA tax filing date. Missing the deadline may result in a lost contribution opportunity for that year.

Should I Open a Trump Account for My Child?

The Trump account is a new tax-deferred savings option for children aged 17 and younger. It works like a traditional IRA after the child turns 18 but has special limits and rules before then.

For families who qualify, the $1,000 federal contribution, employer contributions, and other potential general funding contributions represent free money, and there is little reason to decline them. However, when it comes to making contributions from your own funds, it is important to evaluate whether the Trump account, a 529 plan, a Roth IRA (if eligible), or another savings vehicle is the best fit for your child, unless you have the resources to take advantage of them all.