Hello, families and future savers!
If you’ve just welcomed (or are about to welcome) a new baby into your home, you’re probably juggling diapers, car seats, and maybe a few sleepless nights. Good news: now there’s a new savings tool you will want to tuck into your trusty parenting-toolbox — the “Trump Account.”
Let me walk you through it without too much tax jargon.
So, what *is* a Trump Account?
Thanks to the OBBBA, Congress has created a brand-new type of investment account designed **for kids**.
Here are the key features:
It’s available for U.S. citizens under age 18 who have a Social Security number.
For children born between January 1, 2025** and **December 31, 2028, the federal government will deposit $1,000 into their Trump Account as a “baby bonus”-seed fund.
After the account is open, individuals (parents, grandparents, friends) can contribute up to $5,000 per year (before the child turns 18) on an after-tax basis.
Employers may contribute up to $2,500 per year to the Trump Account of an employee’s child, treated as a payroll benefit in many cases.
The funds are invested (initially) in a broad U.S. stock index fund (lots of experts expect something like an S&P 500index fund) until the child turns 18.
After the child reaches age 18, the account transitions (or rolls) into a “traditional IRA‐type” structure, subject to traditional withdrawal/tax rules.
What tax benefit does it offer?
Here’s where it gets fun (and where you will appreciate the CPA side of things):
The initial $1,000 government seed is **free money** for eligible children born in the 2025-2028 window. That’s an automatic boost to the child’s savings.
The contributions you make (up to $5,000/year) are **not tax-deductible** — so you won’t reduce your income today for putting money in the account.
The money can grow tax-deferred while it remains in the account (i.e., you won’t be taxed each year on growth while invested).
When distributions are taken (after the child hits 18), they are taxed similarly to a traditional IRA: earnings are taxed as ordinary income and early withdrawals could incur a 10% penalty unless used for qualified purposes (education, first home, etc.).
* Because the child (when young) will likely be in a very low tax bracket (or possibly 0% bracket if they have no earned income), converting or managing the account for future tax-free growth might be a powerful long-term strategy.
How to set one up (and what you should know)
Here’s your action plan:
1. Birth + Social Security number – The child must be a U.S. citizen and have a valid SSN.
2. Account creation – Either a parent/guardian opens the Trump Account through an approved financial institution (once IRS/ Treasury guidance is issued) *or* the Treasury may automatically open the account under the pilot program for eligible newborns. (More information will be available once the IRS offers guidance).
3. Initial seed deposit – For eligible children born 2025-2028, expect the automatic $1,000 deposit by the government once the system is active.
4. Contribute – After the child has the account, you (and/from 2026 onward) can contribute up to $5,000/year (until child turns 18). Employers can contribute up to $2,500/year.
5. Investment rules – The funds must be invested in broad U.S. stock index funds (no exotic investments) and fees are capped.
6. Documentation & compliance – Keep track of contributions, account statements, and ensure the child meets the eligibility rules. Also watch for IRS guidance (since full rules are still being finalized).
7. Future planning – When the child hits 18, think about how to roll the account (into IRA) and how to manage distributions so you gain the tax benefit maximum.
Why this matters (and why I’m excited)
It gives your child a head-start in savings. A $1,000 seed and years of potential growth = pretty cool for a newborn!
It introduces a savings mindset early — helpful even if you don’t contribute the full $5,000/year, just having the account is a plus.
From a tax-planning perspective, starting early (when tax brackets are low) can unlock long-term tax-efficient growth.
While there are still details to be finalized (so yes, we will monitor IRS guidance), the opportunity is worth noting on your roadmap.
A couple of “just-so-you-know” items
The full mechanics and guidance from the IRS/Treasury are *not yet* finalized, so consider this an “early-bird” opportunity with some caveats.
Contributions aren’t deductible, so the tax savings aren’t immediate — the benefit is longer term.
If the money is withdrawn early and for non-qualified uses, taxes + penalty may apply — treat it as a long-term account.
While the $1,000 seed is available for children born in 2025-2028, the account itself is available more broadly for kids under 18.
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Bottom line for you:
If you’ve got a new baby (or expect one soon), now is the time to plan.
The Trump Account is a new tool to help your child’s savings journey start right.
Bring your child’s birth information and SSN to our next meeting and let’s talk about setting up the account (or preparing to) and how it fits into your overall tax & savings plan.
We’ll stay on top of the final rules together to make sure you’re positioned for the maximum benefit.
As always, reach out to Macari, Viens & Company Ltd. with all of your tax and accounting questions!
