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Trump Accounts for Kids: How Do They Work and Who Qualifies?

Updated
Joel O'Leary
Author: Joel O'Leary
Joel O'Leary
Joel O'Leary
Full-Time Personal Finance Writer

Joel O’Leary is a full-time Personal Finance Writer at Motley Fool Money, covering credit cards, bank accounts, investing, mortgages, and other personal finance topics. Joel has been writing about personal finance since 2018, previously leading editorial content for the How To Money podcast and serving as a resident writer at Budgets Are Sexy. He bought his first rental property at age 18, funding the down payment with savings from his high school job at McDonald’s -- a testament to his lifelong passion for smart money decisions. His work aims to make personal finance accessible and actionable for everyday readers. When he’s not writing, Joel enjoys surfing and spending time with his family.

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I manage six custodial brokerage accounts for my kids and their cousins -- and I'm about to open a seventh for my new baby niece. So when Trump Accounts launched as part of the One Big Beautiful Bill Act (OBBBA) last year, you better believe I read every word of the IRS guidance.

The short version: if your baby was born after January 1, 2025, there's $1,000 in free government seed money waiting for them -- and the top brokers below are already set up to handle these accounts. If your kids were born before 2025, a brokerage account at one of these same brokers may actually be a better fit than a Trump Account anyway.

Here's exactly how Trump Accounts work, who qualifies, and how to decide where to open one.

What is a Trump Account?

A Trump Account is a new type of tax-advantaged investment account for children under 18, created under the One Big Beautiful Bill Act, which was signed into law on July 4, 2025.

Think of Trump Accounts as starter IRAs for kids. These accounts operate in a custodial-style structure: the assets are owned by the child, while an adult (typically a parent or guardian) manages the account until the kid reaches age 18.

Trump Accounts are set to launch on July 4, 2026. The U.S. Treasury Department will set up and administer the initial accounts, with families able to roll them over to a financial provider of their choice after that.

Top Brokers of 2026

Fidelity
5.00/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Fees:

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E*TRADE from Morgan Stanley
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Commission-free stock, mutual fund, and ETF trades; other fees apply

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Robinhood
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Fees:

$0 on trades of stocks, ETFs and their options. Other fees may apply.

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A top pick for beginners, Robinhood combines $0 commission trades, an easy-to-use app, and a rare retirement deposit match.

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Who qualifies for a Trump Account?

Any child can have a Trump Account opened for them as long as they meet these basic requirements:

  • Under 18 years old on Dec. 31 of the year the account is opened
  • Is a U.S. citizen with a valid Social Security number
  • Only one account per child allowed

To qualify for the $1,000 government seed contribution, there's one additional requirement:

  • Born between Jan. 1, 2025, and Dec. 31, 2028

So if your baby was born in 2025, 2026, 2027, or 2028 -- go get that free money. If your kids were born before 2025 (like mine) they can still have a Trump Account, but the $1,000 seed contribution isn't on the table.

How does the $1,000 seed money work?

Parents must elect to open an account for their child by filling out and submitting Form 4547 -- the same form on which you elect to receive the $1,000 pilot contribution for eligible babies.

The best way to do that right now is to submit the form electronically with your 2025 federal income tax return. Starting this summer in 2026, there will also be an online portal at trumpaccounts.gov for all parents to establish an account.

Contribution limits and investment rules

Parents, other adults, and employers can contribute up to a combined total of $5,000 per year per child to a Trump Account for 2026 and 2027.

The contribution limit does not include the initial government seed contribution or any philanthropic contributions. Limits will change afterwards (indexed to inflation) starting in 2028.

Employers can contribute up to $2,500 per year per employee, and amounts above $2,500 are treated as taxable income. Notably, unlike other types of IRAs, Trump Accounts do not require individuals to have earned income or restrict contributions based on total income.

On the investment side, the rules are strict. Contributions must be invested in funds that track a qualified U.S. stock index, do not use leverage, and do not have annual fees and expenses of more than 0.1%.

My interpretation: basically low-cost S&P 500 index funds only.

If you're new to index fund investing, our picks for the best index funds are a good place to start learning what these funds actually look like.

Rules for withdrawing the money

For children under the age of 18, no distributions are allowed under any circumstances.

Once the child turns 18, the account will transition to traditional IRA rules, with distributions taxed as ordinary income.

If the beneficiary takes a distribution prior to age 59 1/2, a 10% early withdrawal penalty applies -- with certain exceptions for qualified expenses such as higher education costs or a first home purchase up to $10,000.

How Trump Accounts are taxed

Trump Accounts are structured like traditional IRAs. Contributions from parents are after-tax (no deduction perk), but all growth is taxed as ordinary income at withdrawal.

Here's where it gets a little messy -- Trump Accounts might end up containing a mix of after-tax dollars (parent contributions) and pre-tax dollars (the government's $1,000, employer contributions, charitable gifts). Families need to carefully track which dollars are which every single year -- because if that basis isn't documented, those after-tax contributions could end up getting taxed again at withdrawal.

That's potentially 18 years of annual record-keeping just to protect money you already paid taxes on.

Personally, this is the deal-breaker for me, and why I'll be prioritizing other investment account types for my kids. My feeling is that I can get similar (or better) tax advantages from other account types.

How Trump Accounts compare to other kids' savings options

Trump Accounts aren't the only way to invest for your kids. Here's a quick overview of the alternatives:

  • 529 college savings plans are purpose-built for education expenses. Contributions are after-tax, but growth and qualified withdrawals are completely tax-free. If your primary goal is funding college, a 529 plan is hard to beat.
  • Custodial Roth IRAs are available for kids with earned income -- meaning your teenager with a part-time job qualifies. Contributions are after-tax, and qualified withdrawals are completely tax-free. This is one of the most powerful accounts available for a working teen. Our best Roth IRA accounts list is a good starting point for opening one.
  • UGMA/UTMA custodial brokerage accounts are what I personally use for my kids and nephews. There are no contribution limits beyond annual gift tax rules, no restrictions on what you invest in, and no rules on what the money can eventually be used for. When the kids hit legal age, they get full control.

One thing to know: investment income in custodial brokerage accounts is subject to "kiddie tax" rates. For families investing in low-turnover index funds that don't throw off much income, this typically isn't a major issue, and might qualify for the 0% rate. This is the case with the accounts I manage for my kids and their cousins.

The bottom line

If your baby was born after Jan. 1, 2025, filing Form 4547 to claim the $1,000 seed money is a no-brainer. It's free money, and you don't have to contribute anything else.

That $1,000 invested in an S&P 500 index fund from birth could realistically grow to $5,000 or more by age 18.

But if you're weighing whether to make ongoing contributions to a Trump Account, it's worth comparing the tax rules carefully against a 529 plan, a custodial Roth IRA, or a plain old custodial brokerage account. For many families -- especially those whose kids don't qualify for the seed money -- the flexibility and tax treatment of other accounts will be a better fit.

Most top-rated brokers let you manage custodial accounts under the same login as your own investments. Check out our best brokers for 2026 to find the right fit for your family.

Alternatives to Consider

We recommend comparing brokerage options to ensure the account you're selecting is the best fit for you. To make your search easier, here's a short list of our best trading platforms of 2026.

Broker Best For Commissions Learn More
Logo for Fidelity
5.00/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Full-service investing at every experience level $0 commission for online U.S. stock and ETFs*. No account fees****.
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On Fidelity's Secure Website.

Logo for Charles Schwab
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Low-cost investing with a full-featured platform $0 stock, ETF, and Schwab Mutual Fund OneSource® trades. No fees to buy fractional shares.
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Logo for Robinhood
4.80/5 Circle with letter I in it. Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor. We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.
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Low fees on stocks, ETFs, crypto, and options $0 on trades of stocks, ETFs and their options. Other fees may apply.
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On Robinhood's Secure Website.