Trump Accounts 2025: How Parents Can Benefit

Free Money for Newborns (Yes, Really)

Under a pilot program, parents of U.S. citizens born between 2025 and 2028 can elect to open a Trump Account on behalf of their newborn. The federal government will fund each eligible account with $1,000 in seed money—no strings attached. Once enrolled, parents can contribute up to $5,000 annually starting July 4, 2026.

To qualify, the child must have a Social Security number, and the election must be made according to IRS instructions (details coming soon). Think of it as a head start on your child’s future retirement or savings plan.

How Trump Accounts Work

Beginning in 2026, parents, grandparents, and others can contribute a combined total of up to $5,000 per year (adjusted for inflation starting 2028) until the year the child turns 18. The account’s balance grows tax-deferred, meaning you pay no federal income tax while the money remains invested.

Rules Before Age 18

• Contributions are non-deductible, but earnings grow tax-deferred.
• The government’s $1,000 seed deposit doesn’t count toward the annual limit.
• No withdrawals are allowed before the child turns 18.

By the time your child becomes an adult, years of compounding can turn modest contributions into significant savings.

What Happens at 18

When your child turns 18, the Trump Account automatically converts to a traditional IRA. From that point on, the same tax rules apply as with any standard IRA:

• Your child must have earned income to make future contributions.
• Distributions before age 59½ may be subject to a 10 percent penalty unless an exception applies.
• Non-deductible contributions create a cost basis that reduces future taxable withdrawals.

Eligible Investments

Until age 18, funds can only be invested in low-fee mutual funds or ETFs that track qualified U.S. market indexes such as the S&P 500. These investments cannot use leverage and must charge no more than 0.1 percent in annual fees. The goal: stable, broad-based, long-term growth.

Employer and Community Contributions

Starting July 4, 2026, employers may contribute up to $2,500 per year (indexed for inflation) to a Trump Account for an under-18 employee or dependent. These contributions are:

• Tax-free to the employee
• Tax-deductible for the employer

States, local governments, and qualifying nonprofit organizations can also make tax-free general contributions to groups of children under future IRS guidelines.

Why Trump Accounts Could Be a Win

Consider the long game. If parents contribute $5,000 per year from birth through age 17, that’s $85,000 in contributions—plus the $1,000 from the pilot program. At a modest 5 percent annual return, the balance could reach about $138,000 by age 18. If the funds stay invested until age 60, the account could grow to over $1.2 million—all tax-deferred.

Comparing Your Options

Unlike 529 college savings plans or Coverdell accounts, Trump Accounts don’t restrict how the funds are spent once the child reaches adulthood. They also avoid the “kiddie tax” that can impact custodial accounts and trusts. While not a replacement for education savings, they offer another flexible, tax-efficient way to build generational wealth.

Key Takeaways

• Eligible newborns (2025–2028) receive $1,000 in free government seed money.
• Parents and relatives can contribute up to $5,000 annually per child.
• Employers and certain organizations can make tax-free contributions.
• Funds grow tax-deferred and convert to a traditional IRA at age 18.
• Trump Accounts can complement 529 plans, trusts, and custodial accounts.

Start Planning Now

The rules are new, the opportunities are real, and the benefits could last a lifetime. If you’re a parent or grandparent wondering how to take advantage of Trump Accounts 2025, now is the time to get advice.

Ken-Mar Tax helps families and business owners understand new tax laws and find smart ways to build wealth. To learn how these new accounts fit into your long-term strategy, contact Ken-Mar Tax today.