New Tax-Advantaged Investment Accounts for Minor Children

The One Big Beautiful Bill Act (OBBB) creates a new tax-advantaged investment account for minor children, called “Trump Accounts.” The Treasury and IRS will issue further guidance on implementing the Trump Accounts, but below are some of the key details. 

Eligibility

Generally, children who are U.S. citizens and under 18 are eligible for a Trump Account.

Funding Amounts

• For qualifying children (born after December 31, 2024, and before January 1, 2029) with a Trump Account, the federal government will deposit $1,000 initially into the account.
• Parents can contribute up to an additional $5,000 per year per child, indexed for inflation, so long as the child is under 18.
• Employers may be able to contribute up to $2,500 per year to an employee’s dependent child’s Trump Account, so long as the child is under the age of 18 (but there are certain ambiguities regarding these employer contributions still to be clarified).
• State and local governments and charities can also contribute to a Trump Account (although these contributions must be spread across the accounts of all “eligible” children, with eligibility based upon the year of birth or geographic areas).
• Trump Account balances can only be invested in diversified stock index funds.
• Contributions can be made beginning on July 4, 2026.

Benefits of the Trump Accounts

• The receipt of funds into a Trump Account does not represent taxable income for the recipient child, but parents and other individuals cannot claim a deduction. Employer contributions are tax-deductible business expenses like those made to 401(k) or healthcare benefits.
• Trump Accounts are generally governed similarly to a traditional Individual Retirement Account, meaning:
  • Required minimum distribution rules apply.
  • Withdrawals (other than those attributed to after-tax contributions) represent ordinary income.
  • A 10% early withdrawal penalty applies if distributed before the age of 59.5 years old unless used for a qualifying expense such as higher-education costs, disability, first-home purchase (up to $10,000), or birth of child (up to $5,000).

Other Considerations

Contributions to a Trump Account are subject to the normal gift and estate tax rules, meaning contributions will count against the annual gift tax exclusion amount. Other tax advantaged accounts, like section 529 plans, may provide a more tax efficient vehicle for parents to contribute to their children. Finally, like many provisions of the OBBB, important details will still need to be clarified by the Treasury and IRS.