The New "Trump Accounts": What to Know Before July 4th
If you have kids or grandkids under 18, you have probably heard the term "Trump Accounts" come up in the news recently. Officially called Section 530A accounts, these are brand new tax-advantaged savings accounts for minors that the government is rolling out starting July 4, 2026.
This article will walk you through what these accounts are, who can open them, what the money can be used for, and how they might benefit your children or grandchildren.
TL;DR
A Trump Account (TA) is essentially a "starter" retirement account for children — you can put money in during childhood, but the child can't touch it until they turn 18. After that, they can convert it to a Roth IRA or eventually withdraw it in retirement like a traditional IRA.
How Does It Work?
Think of the account's life in two phases.
Phase 1: The "Growth Period" (Birth to Age-18 Year)
During this phase, contributions are allowed but distributions (withdrawals) are not. The money is locked in and must be invested in low-cost index funds that track a broad U.S. equity market — think total market or small-cap index ETFs. No leveraged funds and funds must carry annual fees of 0.10% or less. The rules are intentionally restrictive to keep costs down and keep the money growing in a sustainable fashion.
Phase 2: Post-Growth Period (Age 18 and Beyond)
Once the beneficiary enters the year they turn 18, they become the "owner" of the account. At that point, they have four options:
Keep it as a Trump Account
Roll it over to a Traditional IRA
Convert it to a Roth IRA
Take a distribution (with potential taxes and penalties if they're under 59½)
The account behaves very similarly to a Traditional IRA from that point forward. Early withdrawals before age 59½ are subject to the standard 10% penalty, though there are exceptions for things like education expenses, a first home purchase (up to $10,000), and birth or adoption (up to $5,000).
How Do You Open One?
Starting now, you can file Form 4547 or apply at trumpaccounts.gov to get the process started. All new accounts will initially be opened at BNY/Robinhood (and can be transferred to another institution later). The accounts go live after July 4, 2026.
A couple of important requirements to note:
The beneficiary (the child) must have a Social Security Number and be under their age-18 year
The form must be filed by an "authorized individual" — a guardian, parent, adult sibling, or grandparent, in that order
BNY/Robinhood is expected to reach out in May 2026 with activation instructions.
Who Can Contribute and How Much?
This is where it gets a little more nuanced. There are four types of contributions allowed during the growth period.
Direct Contributions
Anyone — parents, grandparents, aunts and uncles — can contribute up to $5,000 per year on behalf of a child. This limit is indexed to inflation starting in 2027. Contributions must be made by December 31 of the contribution year (not the April 15 deadline you might be used to for IRAs and HSAs). These contributions are non-deductible, meaning they don't lower your taxable income, but they do increase the account's cost basis.
One potential trap with direct contributions: Because Trump Accounts can't be accessed until the child's age-18 year, the IRS may consider them "future gifts" rather than present-interest gifts. This matters because the annual gift exclusion ($19,000 per person in 2026) only applies to present-interest gifts. This means that third-party contributions to a Trump Account might technically require a Form 709 gift tax return — a headache worth discussing with your tax advisor. One potential workaround is to gift the money to a custodial (UTMA/UGMA) account first and then transfer it to the Trump Account, though guidance on this is still evolving.
Employer Contributions (Sec. 128)
Employers can contribute up to $2,500 per year to a Trump Account for employees or their dependents. This is per employee, not per child. Employer contributions are excluded from federal taxable income (good news for the employee), but they count toward the $5,000 combined annual limit. Also worth noting: contributions cannot discriminate in favor of highly compensated employees, so this benefit is generally only available at companies that have lower-paid staff as well. Sole proprietors, Single Member LLCs and family owned business are likely to be restricted from making the “employer” contribution to the Trump accounts because there is a good chance that everyone is a highly compensated employee.
Qualified General Contributions (QGC)
Charitable organizations and government entities can contribute directly to Trump Accounts on behalf of qualifying groups of children. These contributions have no annual dollar limit and don't count against the $5,000 direct contribution limit. Think of this as the "Dell Foundation gives $250 to kids in low-income ZIP codes" type of program. If you have children who qualify based on geography or birth year, this could be free money worth watching for.
$1,000 Pilot Program Contribution
For U.S. citizens born between 2025 and 2028, the federal government will contribute $1,000 to their Trump Account as part of a pilot program. This is free money. It doesn't count against the $5,000 limit, and it is excluded from income. You simply need to elect it on Form 4547 or at trumpaccounts.gov.
State Tax Warning
This is one that clients in Pennsylvania especially need to pay attention to. Pennsylvania is one of seven states planning to tax annual earnings inside Trump Accounts. The others are California, Hawaii, Kentucky, Massachusetts, South Carolina, and Wisconsin. Your state may also tax employer contributions and QGCs. This doesn't mean the accounts aren't worth using — federal tax-free growth is still valuable — but it does change the math a bit compared to someone living in a state with no income tax.
Roth Conversion: The Most Powerful Move
Once the child enters the post-growth period (age 18 year), they can convert the account to a Roth IRA. The owner owes income tax on the non-basis portion of the account, but after that, all future growth is tax-free forever. This is likely the best long-term strategy if contributing to your child’s retirement is a part of your plan.
One important wrinkle: the "kiddie tax" applies to Roth conversions. If the child is under 19 (or a full-time student under 24 with limited earned income), unearned income — including Roth conversion income — above $2,700 is taxed at the parents' marginal rate. The first $1,350 is tax-free and the next $1,350 is taxed at the child's rate. Because of this, most families will want to wait until the child is no longer subject to kiddie tax rules before executing the conversion.
This means planning ahead for who will pay the tax bill when the time comes is an important part of the strategy.
So What Should You Actually Do?
I would think about Trump Account planning in three levels.
Level 1: Take the Free Money
If you have a child born between 2025 and 2028, elect the $1,000 pilot program contribution — it's free. Keep an eye out for Qualified General Contributions from foundations or employers that may apply to your children. These are no-brainer moves regardless of your financial situation.
Level 2: How Does This Fit Your Goals?
Trump Accounts are designed for retirement, not education or home purchases. A 529 plan is still the right tool for college savings. A UTMA/UGMA account is better for general childhood/young adult expenses (vehicles, houses, weddings, home down payments). If you've already got those bases covered, a Trump Account can be a great way to layer on additional tax-advantaged wealth building for your child's future.
Level 3: Max Fund and Convert to Roth
For families that have education and other savings goals well-funded, maxing out the $5,000 annual direct contribution and eventually converting to Roth at a low tax rate is a powerful long-term strategy. A child who receives $5,000 per year from birth to age 18 — plus the $1,000 pilot program contribution — could have a meaningful account balance by the time they enter adulthood. The key is planning for who will pay the conversion taxes and making sure the child understands what they're inheriting when the account comes under their control at 18.
One thing I want to emphasize: the child will have withdrawal capability starting at age 18 and full control by the age of majority. Having a conversation with them early about the purpose of the account and how to use it wisely is just as important as the financial mechanics.
Bottom Line
Trump Accounts are a genuinely useful new tool, but like most tax-advantaged accounts, the details matter. The $1,000 pilot program and employer/QGC contributions are easy wins for most families. Beyond that, whether and how much to contribute depends on your broader financial plan — how you've prioritized education savings, your current tax bracket, and what you want this money to accomplish for your child.
If you have questions about how Trump Accounts fit into your specific situation, feel free to schedule a meeting.
Disclosures: This article is for educational purposes only and does not constitute tax or legal advice. Rules around Trump Accounts (Section 530A) are new and guidance from the IRS is still developing. Please consult a qualified tax professional before making decisions. Pennsylvania and certain other states may tax earnings inside these accounts differently than at the federal level.
Ian Wild, CFP® | All-Pro Advisors | contact@all-proadvisors.com | 412.561.9400
