Trump Accounts: The New Federal Savings Vehicle for Children
Established under the One Big Beautiful Bill Act (OBBBA) in July 2025, Trump Accounts are tax-deferred investment accounts designed to provide a financial "nest egg" for every American child born between 2025 and 2028.
Key Features and Eligibility
- The $1,000 Seed: The federal government provides a one-time $1,000 deposit for every U.S. citizen born between Jan 1, 2025, and Dec 31, 2028.
- Annual Contributions: Families can contribute up to $5,000 per year (after-tax).
- Employer Match: Employers can contribute up to $2,500 pre-tax per employee (total across all dependents), which does not count toward the employee's taxable income.
- Investment Rules: Until the child turns 18, funds must stay in low-cost (under 0.1% fee) U.S. stock index funds.
Tax Treatment
- Growth: All earnings grow tax-deferred.
- Withdrawals: Generally prohibited until the child turns 18. Upon withdrawal, gains are taxed as ordinary income.
- Conversion: At age 18, the account can be converted to a Roth IRA, though income tax must be paid on the gains at that time.