What is a Trump account and how is it taxed?

A Trump account is a traditional IRA set up for a child under 18 under IRC §530A. Family and others can contribute up to $5,000 a year, with no deduction, starting 12 months after the law was enacted. The money can't come out before the year the child turns 18 and must be invested in low-cost US stock index funds until then.

Sources checked October 14, 2026. Current through October 13, 2026.

What it is

IRC §530A treats a Trump account as an individual retirement account under IRC §408(a), not a Roth IRA, set up for the benefit of a child. The child must be under 18 at the end of the year the account is elected and must have a Social Security number (as defined in IRC §24(h)(7)). The account has to be designated as a Trump account when it is set up.

Rules until the year the child turns 18

When contributions can start: the governing instrument can't accept contributions before 12 months after enactment. The law was enacted July 4, 2025.
Annual limit: $5,000 per calendar year, indexed for inflation after 2027. Three kinds of "exempt contributions" don't count toward it: qualified rollovers, qualified general contributions, and the federal pilot payment under IRC §6434.
No deduction: contributions made before the year the child turns 18 aren't deductible under IRC §219.
Investments: only "eligible investments". These are mutual funds or ETFs that track the S&P 500 or another qualifying index of mainly US companies, use no leverage, and charge annual fees and expenses of no more than 0.1%.
No withdrawals: distributions aren't allowed before January 1 of the year the child turns 18, with exceptions such as qualified rollovers and a qualified ABLE rollover.

Employer contributions

An employer can contribute to the Trump account of an employee or the employee's dependent under a qualifying program. The employee excludes up to $2,500 a year from income (IRC §128), indexed after 2027. Employer contributions are not on the exempt list, so they count toward the $5,000 limit.

The $1,000 federal pilot payment

For a US citizen child born after December 31, 2024 and before January 1, 2029, a parent can elect a one-time $1,000 payment from the government into the child's Trump account (IRC §6434). The election requires the child's Social Security number.

How withdrawals are taxed

Distributions are taxed under the annuity rules of IRC §72. The account's tax-free "investment in the contract" leaves out qualified general contributions, the §6434 pilot payment and employer contributions excluded under IRC §128. Earnings, and those amounts, are taxable when withdrawn. Personal after-tax contributions are the part that comes back tax-free.

Sources

IRC §530A: Trump accounts
IRC §6434: Trump accounts contribution pilot program
IRC §128(b): Employer contributions to Trump accounts

Not tax advice. Check the sources against your client's facts before relying on this.