The One Big Beautiful Bill Act (OBBA), signed into law on July 4, 2025, created Trump Accounts. These new tax-advantaged savings account were designed to help American children build wealth from birth.
Eligibility
Trump Accounts are available to any U.S. citizen under the age of 18, provided that at least one parent or guardian has a valid Social Security number. While any eligible child can have a Trump Account, the law includes a special incentive for newborns, children born between January 1, 2025 and December 31, 2028 will automatically receive a $1,000 government-funded contribution into their Trump Account. If parents don’t open an account, the U.S. Treasury will do so on their behalf.
Contribution Rules
Families can contribute up to $5,000 per year per child, with the limit indexed for inflation starting in 2028. Employers may also contribute up to $2,500 annually to an employee’s child’s account, and these contributions are excluded from the employee’s taxable income. Contributions must be made in cash. Before the beneficiary reaches age 18 the $5,000 limit does not apply toward the funding limit of other retirement plans. Contributions are not tax deductible. The $1,000 government contribution is not taxable at the time of contribution.
Investment Rules
Trump accounts must be invested in low-cost, diversified index funds that track the U.S. stock market. No leveraged or sector-specific investments are allowed.
Distributions
Withdrawals from Trump Accounts are not allowed until the beneficiary turns 18. After age 18, the rules follow the rules for traditional IRAs. Basis is withdrawn tax free, growth is taxed as ordinary income subject to the 10% early distribution penalty if under 59 and a half. There are exemptions from the 10% penalty if used for higher education, or up to $10,000 is used for a first-time home purchase.
Conclusion
Earlier drafts of the OBBA included more specific tax advantages that distinguished Trump accounts from other types of tax deferred accounts. As these provisions were removed from the final bill, these accounts seem to lack a specific purpose and are not a clear advantage over other savings vehicles. The $1,000 of free money is an additional blessing to anyone with a child born before the end of 2028, but contributing additional funds into this type of account does not have a clear advantage yet. It is most similar to a regular IRA funded mostly with after tax nondeductible contributions. It may provide an additional vehicle to fund children’s retirement accounts when other accounts have already been maximized. You should determine what financial goal you are trying to accomplish and then pick an appropriate account(s) to accomplish that goal(s).