Starting in July 2026, the federal government is rolling out a new money-saving program built specifically for children (and newborns). Called Trump Accounts, each account comes with a $1,000 deposit from the U.S. Treasury to get things started for the younger generation, and more than 6 million children were signed up before the accounts even officially opened.
If you have a young child, or one on the way, here’s what you need to know.
So, what is a Trump Account?
A Trump Account is a new kind of savings and investment account for kids, created by the tax law signed in July 2025 (officially the ‘Working Families Tax Cuts’ part of the One Big Beautiful Bill). Think of it as a starter retirement-style account for a child: money goes in, gets invested in the stock market, and grows over time. The accounts officially opened the week of July 4, 2026.
The $1,000 starter deposit
For any child born between January 1, 2025, and December 31, 2028, who is a U.S. citizen with a Social Security number, the U.S. Treasury will make a one-time $1,000 deposit into their account at no cost to you. You simply have to enroll the child to claim it.
Kids born outside that window can still have a Trump Account; they just won’t receive the $1,000 starter deposit.
How a Trump Account works:
• Who it’s for: Any child under 18 with a Social Security number.
• Who runs it: A parent or guardian manages the account until the child turns 18. Legally, the child owns the money.
• Adding money: Family and friends can contribute up to $5,000 per year (after-tax) — but that’s a combined cap for the child, not a limit per person. So if grandma puts in the full $5,000 this year, grandpa and mom can’t add more on top. Some employers may also add up to $2,500 per year, which isn’t counted as taxable income to you and falls within that $5,000 annual cap. The government’s $1,000 doesn’t count against the limit.
• No paycheck required: Unlike a traditional IRA, your child doesn’t need earned income to contribute. That means you can start funding what’s essentially a retirement-style account from the day they’re born — years before they ever hold a job.
• How it’s invested: The money goes into a low-cost fund that tracks the U.S. stock market (like an S&P 500 index fund), and it grows tax-deferred, meaning no tax on the growth year to year.
• Getting the money out: Funds generally stay put until the year the child turns 18. After that, the account becomes a traditional IRA. This is the detail many families miss. From then on, standard retirement-account rules apply: taking money out before age 59½ generally triggers a 10% early-withdrawal penalty, unless it’s used for qualified higher-education costs or a first-time home purchase. Funding a business can sidestep the penalty too, though only through specialized strategies best reviewed with an advisor. One important caveat: dodging the penalty isn’t the same as dodging tax. The account’s earnings and any government or employer contributions are still taxed as ordinary income whenever they come out.
One recent update: As of June 2026, the IRS confirmed that contributing to a child’s account generally won’t require filing a gift tax return. These gifts count toward the normal $19,000 (2026) annual gift tax exclusion. If you’re already making other sizable gifts to that same child, though, it’s worth a quick check with your advisor.
Quick tips to set up a Trump Account:
The whole process takes about 5–10 minutes:
- Go to trumpaccounts.gov or sign in to your account at IRS.gov.
- Verify your identity through ID.me (free to set up if you don’t already have one).
- Complete and submit IRS Form 4547 (‘Trump Account Election’) to enroll your child and claim the $1,000.
- Have your child’s Social Security number, date of birth, and address ready.
One important note: once someone signs a child up, no one else can open a second account for that same child, so coordinate within your family first.
Tax considerations
Opening the account itself is straight forward and it’s handled through the IRS and Treasury. The tax side is where things can get more nuanced: how contributions and withdrawals are taxed over time, how a Trump Account fits alongside a 529 plan or other savings, and whether it makes sense for your family’s situation. There can even be planning opportunities down the road, such as converting the account to a Roth IRA at 18, when the child’s income is low, so future growth can eventually come out tax-free.
If you have any questions or would like to further discuss this topic, please reach out to us at info@ascendadvisors.com.
