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Trump Accounts: What You Need to Know Thumbnail

Trump Accounts: What You Need to Know

Trump Accounts offer a structured way for families to save for children’s futures in a hands-off, tax-efficient way. By starting these accounts from a very young age, children will benefit significantly from compound interest. Launched in 2025 as part of the One Big Beautiful Bill, they let families invest early with government support for qualifying newborns. While these accounts offer potential benefits, they also come with some considerations to be mindful of. 

Who’s Eligible?

Eligible children must have a valid US social security number (SSN) and be under 18 years of age. If your child is a US citizen who is born between January 1, 2025, and December 31, 2028, they are eligible for a one-time government deposit of $1,000. Those born outside this timeframe and still under the age of 18 are eligible to set up an account, but they will not receive the government boost. Each child is allowed to have one Trump account. 

Contributions

Contributions to these accounts are maxed at $5,000 annually. So regardless of who is contributing (family, friends, employers, grandparents, or others), the cumulative contribution cannot exceed $5,000. Employees are capped at $2,500 per year to this overall amount and beginning in 2027, it’s anticipated this figure will increase with inflation. 

The funds are invested in low-cost US stock index funds with fees under 0.10%. And one big perk? The growth is tax-deferred until withdrawal, which gives most young investors decades of compounding interest.

For those considering contributions, note that they are treated as gifts under US tax law. This means you may need to submit a Form 709 as part of your gift tax reporting even for small amounts. 

Withdrawals

Consider these accounts mostly locked until the child turns 18. There are some exceptions, but they are rare. Once the child turns 18, their Trump account rolls into a traditional IRA. If they withdraw funds before they turn 59 ½, they will be charged income tax and a 10% penalty fee, which is waived at times for expenses including a home or education. Post 59 ½, the withdrawn funds are taxed as income. 

Considerations 

If you are considering a Trump account for a child, there are a few key points to take note of:

  • If you accidentally over contribute, ensure you withdraw the excess funds quickly to avoid penalties of 6%.
  • These funds are fundamentally locked in until the child is 18 years old, so contribute with that in mind.
  • Employee contributions are tricky for non-US based persons
  • The investment choices are limited to US index funds
  • If you are a US person living overseas, these accounts may be taxable depending on where you live
  • Contributions are considered gifts and may require additional tax filing
  • There may be additional US tax filing requirements including possible FATCA reporting when you live overseas
  • Program rules may evolve as additional guidance is released

Conclusion

Trump Accounts offer an effective way to start saving early in a tax-efficient way. To find out if this might be a viable strategy for you and your family, please reach out to one of our wealth planners.


This material is intended for educational and informational purposes only. It is not intended to provide specific advice or recommendations for any individual. Additionally, you should consult with your Financial Advisor, Tax Advisor, or Attorney on your specific situation. The views expressed in the material are that of the author and do not necessarily reflect those of any market, regulatory body, State or Federal Agency, or Association. All efforts have been made to report or share true and accurate information. However, the information may become materially outdated or otherwise rendered incorrect due to subsequent new research or other changes, without notice. The author nor the firm are able to always verify the content from third-party sources. For additional information about the firm, please visit the MAS Website at https://www.mas.gov.sg/  and the SEC Website at www.adviserinfo.sec.gov. For a copy of the firm's ADV Part 2 Brochure, please contact us at info@avriowealth.com.