Accounts
Trump Account
A federal savings account for a child under 18 — a traditional IRA with special rules until adulthood
A Trump account is a traditional IRA opened for a child under IRC § 530A — with three constraints that make it unlike any other account: index funds only, no withdrawals before 18, and a federal tax deferral that California does not currently recognize.
Key takeaways
- Created by IRC § 530A. It is a traditional IRA for a child, not a 529 and not a Coverdell — and it cannot be created by converting an existing IRA.
- During the growth period (from establishment through December 31 of the year the child turns 17), the account may hold only eligible investments: low-cost, unleveraged mutual funds or ETFs tracking a broad U.S. equity index.
- No distributions are permitted during the growth period. There is no hardship, education, medical, or disability exception.
- Federal tax deferral does not necessarily carry to your state. California has not conformed to § 530A, so account earnings may be taxable in California every year.
What it is
A federal savings account for a child under 18 — a traditional IRA with special rules until adulthood. The account is a structure; the investments it holds are separate and carry their own risks.
Who it’s for
- Parents and guardians of a child under 18 who has a Social Security number
- Families of children born 2025–2028, who may claim the one-time $1,000 federal contribution
- Employees whose employer offers § 128 contributions of up to $2,500 a year
- Families who can leave the money untouched until the child turns 18
How it works
- An authorized individual — in order of priority, a legal guardian, parent, adult sibling, or grandparent — elects to open the account on Form 4547 or through the federal portal at trumpaccounts.gov.
- Treasury creates the initial account with a selected financial agent, then sends activation instructions to the electing individual, who becomes the responsible party.
- Contributions may begin July 4, 2026. To move the account to another trustee, a rollover Trump account is opened and funded by a trustee-to-trustee transfer of the entire balance.
Eligibility
A child who has not turned 18 before the close of the calendar year in which the election is made, and who has a Social Security number issued before the election. One Trump account per child.
Contributions and funding
Aggregate non-exempt contributions are capped at $5,000 per year for 2026 and 2027, indexed thereafter. Anyone may contribute; no contribution is deductible, and each creates basis. An employer may contribute up to $2,500 per year under IRC § 128, excluded from the employee’s federal income and counted against the $5,000 cap. Children born after December 31, 2024 and before January 1, 2029 may receive a one-time $1,000 federal pilot contribution, which is exempt from the cap and creates no basis. Contributions cannot be made before July 4, 2026
A worked example
Suppose a child born in 2026 receives the $1,000 federal pilot contribution, and the family adds $3,000 a year. The balance must sit in a low-cost broad U.S. equity index fund — not cash, not a money market fund. If the child needs tuition at 16, the account cannot be touched: there is no hardship or education exception. And if the family lives in California, the account’s earnings may be taxed by California every year along the way, because California has not conformed to § 530A.
What it can hold
During the growth period, only eligible investments: a mutual fund or ETF that tracks a qualified index of primarily U.S. equities, does not use leverage, is not sector- or industry-specific, and charges annual fees and expenses of no more than 0.10%. Cash and money market funds are not eligible investments and may not be held as an investment option — cash may be held only transiently, for the time reasonably necessary to invest a contribution, dividend, or sale proceeds into an eligible investment. After the growth period, ordinary IRA investment rules apply.
Taxes and reporting
Federal: earnings are tax-deferred; no deduction is allowed for any contribution during the growth period. State: states are not required to conform to § 530A, and California has not conformed — California generally conforms to the Internal Revenue Code as of January 1, 2015. For California taxpayers, account earnings may therefore be taxable annually, employer § 128 contributions may be included in California income, California’s kiddie-tax rules may apply, and separate federal and California basis records may be required. Do not assume the federal deferral applies in your state. Requires tax review
Withdrawals and distributions
None during the growth period. The only permitted distributions are a qualified rollover contribution to another Trump account, a qualified ABLE rollover during the calendar year the beneficiary turns 17, a return of excess contributions, and a distribution upon the beneficiary’s death. A trustee may not make a hardship distribution, and may not close the account and distribute the funds to the beneficiary. Beginning January 1 of the year the beneficiary turns 18, traditional IRA rules under IRC § 408 apply: distributions are taxable as ordinary income except to the extent of basis, a 10% additional tax may apply before age 59½, and required minimum distributions eventually apply.
How Investor Services custodies it
The trustee of a Trump account must be a bank under IRC § 408(n) or a nonbank trustee the IRS has approved for Trump accounts. Institutional Trust Company holds no such approval today and is not a Trump account trustee. It is seeking a South Dakota trust charter and is not currently accepting accounts.
Risks and limitations
- California has not conformed to § 530A — the federal deferral may not exist at the state level
- The funds are locked until the year the beneficiary turns 18, with no exception for hardship
- At 18 the beneficiary takes irrevocable control and may use the money for any purpose
- The $1,000 federal pilot contribution carries no basis and is fully taxable when withdrawn
- Earnings are taxed as ordinary income, not at capital-gains rates
- Contributions may not qualify for the annual gift-tax exclusion; a Form 709 filing may be required
- Regulations remain in proposed form; contributions, investments, distributions, and reporting await further guidance
Common mistakes to avoid
- Assuming the federal tax deferral applies in your state — California has not conformed
- Expecting a hardship, education, or medical withdrawal before 18; none exists
- Trying to hold the balance in cash or a money market fund, which are not eligible investments
- Attempting to convert an existing custodial IRA into a Trump account, which is not permitted
- Treating the $1,000 federal contribution as tax-free — it carries no basis and is fully taxable on withdrawal
- Overlooking a possible Form 709 gift-tax filing for contributions
Frequently asked questions
Can I withdraw for tuition, a medical emergency, or hardship?
No. The growth-period bar is absolute. The only permitted distributions are a rollover to another Trump account, an ABLE rollover in the year the child turns 17, a return of excess contributions, and death of the beneficiary. There is no hardship, education, medical, or disability exception, and the trustee may not close the account to distribute the funds.
Can the account be held in cash or a money market fund?
No. Cash and money market funds are not eligible investments during the growth period. Cash may be held only briefly — for the time reasonably necessary to invest a contribution, a dividend, or sale proceeds into an eligible investment.
Is the growth really tax-deferred?
Federally, yes. At the state level, not necessarily. California has not conformed to § 530A, so a California family may owe California tax on the account’s earnings each year during the growth period. Confirm your state’s position before treating deferral as a benefit.
Can I convert my child’s existing custodial IRA into a Trump account?
No. The governing instrument must designate the account as a Trump account at establishment. An existing IRA cannot be amended into one.
What happens when my child turns 18?
Beginning January 1 of that year the special rules lapse, the account is governed by traditional IRA rules, and the beneficiary gains full and irrevocable control over investments and distributions.
Educational only. This page is general information, not individualized investment, legal, or tax advice. Rules depend on your account type, transaction, tax year, and circumstances — consult a qualified professional.