Written by Jennifer Beadles, a 17-year real estate investor and founder of Kids Payroll, based on OBBBA, current IRS guidance, and the U.S. Treasury rules for these accounts. Last updated: June 2026.
Trump Accounts are tax-deferred investment accounts for children under 18, created under the One Big Beautiful Bill Act (OBBBA) of 2025. Every U.S. citizen child born between January 1, 2025, and December 31, 2028, receives a one-time $1,000 government seed deposit. Families can add up to $5,000 per year, invested in low-cost stock index funds.
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What is a Trump Account?
A Trump Account is a custodial-style investment account for children under 18, established under the One Big Beautiful Bill Act signed into law in 2025. The account is owned by the child and managed by an authorized adult — usually a parent or legal guardian — during what the IRS calls the "growth period" (the years before the child turns 18).
The money is invested in low-cost U.S. stock index funds or ETFs, with a regulated expense cap of 0.10% and no leverage permitted. Growth is tax-deferred. Generally no withdrawals are allowed before age 18, and after that the account follows traditional IRA rules. Trump Accounts are slated to launch around July 4, 2026, with the Treasury administering the initial accounts before rollovers to financial institutions become available.
Definition: A Trump Account is a tax-deferred, custodial investment account for minors, funded by a $1,000 government seed (for 2025-2028 births) plus contributions from family, employers, and charities, capped at $5,000 per year.
Who qualifies for the $1,000 government seed?
Any U.S. citizen child born between January 1, 2025, and December 31, 2028, with a Social Security number qualifies for the one-time $1,000 government seed contribution. The seed is deposited after the launch of the program and does not count against the $5,000 annual contribution limit.
Children born before 2025, or after 2028, can still open and fund a Trump Account. They simply do not receive the federal seed money. There is one notable exception: the Michael and Susan Dell Foundation committed $6.25 billion to deposit $250 into the accounts of qualifying children age 10 and under who live in ZIP codes with a median household income of $150,000 or less. No separate application is required for that charitable deposit.
Only one funded Trump Account is allowed per child.
How much can families contribute?
Families can contribute up to $5,000 per child per year during the growth period, indexed for inflation after 2027. This single $5,000 cap applies to the combined total of everyone contributing: parents, grandparents, other relatives, family friends, and employers.
A few details matter:
- Employer contributions count toward the cap. An employer can contribute up to $2,500 of the $5,000 annual limit, and that amount may be excluded from the employee's taxable income.
- No earned income is required. Unlike a Roth IRA, the child does not need a job or any earned income to receive contributions to a Trump Account. Almost any adult can contribute on the child's behalf.
- The $1,000 seed is separate. The government seed for 2025-2028 births does not reduce the $5,000 you are allowed to contribute.
Trump Account vs Roth IRA vs 529
The most important thing for families to understand is that a Trump Account is tax-deferred, while a custodial Roth IRA is tax-free. That single difference drives the strategy below.
| Feature | Trump Account | Custodial Roth IRA | 529 Plan |
|---|---|---|---|
| Earned income required? | No | Yes | No |
| Annual contribution limit | $5,000 | $7,500 (2026), up to the child's earned income | No federal limit (gift-tax driven) |
| Growth | Tax-deferred | Tax-free | Tax-free for qualified education |
| Withdrawals | Taxed like a traditional IRA after 18 | Tax-free in retirement; contributions accessible anytime | Tax-free for qualified education, otherwise penalized |
| Government seed | $1,000 (2025-2028 births) | None | None |
| Best use | General long-term head start | Tax-free retirement compounding | Education savings |
The Roth IRA is the most tax-efficient bucket of the three because qualified withdrawals come out completely tax-free. The catch is that a Roth IRA requires the child to have earned income. That is the gap a family business can close.
Can you convert a Trump Account to a Roth IRA?
Yes. On January 1 of the year a child turns 18, the Trump Account automatically becomes a traditional IRA, and from there it can be converted to a Roth IRA. Converting during a low-income year can move the whole balance into a tax-free account at little or no tax cost — which is why many advisors consider the Roth conversion the most valuable feature of these accounts. Two things are worth planning around.
Only the growth is taxed, not your contributions. Money that individuals put into a Trump Account goes in after-tax, so it becomes "basis" that converts tax-free. Only the earnings — plus any pre-tax dollars like the $1,000 government seed or employer contributions — are taxable on conversion. If a child's account holds $60,000 of contributions and $40,000 of growth, only 40 percent of any conversion is taxable. That is more efficient than converting an ordinary traditional IRA, where the full amount is taxed.
Watch the Kiddie Tax timing. A Roth conversion counts as unearned income, and the Kiddie Tax taxes a child's unearned income above roughly $2,700 at the parents' marginal rate, not the child's. The Kiddie Tax can follow a full-time student through age 23. So the obvious window — a low-earning 19-year-old in college — is often still a Kiddie Tax year, which can tax the conversion at your rate instead of theirs. The cleaner approach is to convert in small annual slices, or to wait for years when the child is no longer subject to the Kiddie Tax (no longer a full-time student, providing more than half their own support, or 24 or older) and has low income.
This is exactly why earned income matters so much. A conversion is a timing puzzle with real tax risk if you get it wrong. Earned income flowing into a custodial Roth IRA is tax-free from day one, with no conversion and no Kiddie Tax to navigate. That is the strategy that does the most work for business-owning families.
Why business owners should pair a Trump Account with paying their kids
If you own a business, the Trump Account is only half the wealth-building picture. The other half is putting your kids on payroll, which unlocks the tax-free Roth IRA the Trump Account cannot give you, plus a business deduction and a payroll-tax exemption.
Here is how the IRS code stacks for a parent who employs their minor child in a legitimate business (IRC §3121(b)(3)(A)):
- The wages are deductible as an ordinary business expense, lowering your taxable income.
- The child pays $0 federal income tax on earnings up to the standard deduction ($16,100 in 2026).
- No FICA taxes (Social Security and Medicare) on wages paid to a child under 18 by a sole proprietorship, single-member LLC, or a partnership where both partners are the parents.
- No FUTA taxes on wages paid to a child under 21 by those same entity types.
- The earned income unlocks a custodial Roth IRA, where the child can contribute up to $7,500 (2026) and grow it tax-free for decades.
- Earned income is taxed to the child, not the parent, and is not subject to the Kiddie Tax (IRC §73).
A side-by-side example
Family A opens a Trump Account for their child and contributes $5,000 a year. The child gets the $1,000 seed (if born 2025-2028) and the account grows tax-deferred.
Family B owns a real estate business and uses Kids Payroll to put their child on payroll at a reasonable market rate for real work: photographing rental listings, organizing files, and testing the family's apps. Suppose they pay the child $8,000 for the year. That $8,000:
- Comes off the parent's business income as a deduction.
- Is taxed at $0 to the child (under the $16,100 standard deduction).
- Carries zero FICA and zero FUTA (sole proprietor, child under 18).
- Unlocks a custodial Roth IRA the child can fund up to $7,500, growing tax-free.
- Can also feed a Trump Account, up to the $5,000 cap.
Family B ends up with a business deduction, a tax-free Roth, and a Trump Account. Family A has only the Trump Account. The Trump Account does not require earned income, so anyone can open one — but only earned income unlocks the tax-free Roth, and the cleanest way for a business owner to create that earned income is to pay their kids correctly.
Kids Payroll exists to do exactly that: determine your entity structure, suggest age-appropriate tasks, document reasonable wages, generate time logs and W-2s, and track the standard deduction limit so the wages stay tax-free. See how Kids Payroll works.
How do you open a Trump Account?
First, separate two rules that get confused constantly. Any U.S. child under 18 with a Social Security number can have a Trump Account. Only children born between January 1, 2025, and December 31, 2028, get the $1,000 government seed. If your child was born before 2025, you can still open and fund the account — you just will not receive the seed money.
Because the Treasury is administering the initial rollout, the process is straightforward:
- Confirm eligibility. The child must be under 18 and have a Social Security number. That is all that is required to open an account.
- File IRS Form 4547. This is the election form a parent or legal guardian uses to open the account and, for children born 2025-2028, to claim the $1,000 government seed. You can file it with your tax return or through the official portal once it is live. Children born before 2025 still file to open the account — they simply will not receive the seed.
- Open through trumpaccounts.gov. The official government portal and the Trump Accounts app are where accounts are administered at launch, expected around July 4, 2026.
- Wait for funding. The $1,000 seed (for eligible 2025-2028 births) is deposited after launch. Note that contributions cannot be made until July 4, 2026.
- Contribute and invest. Add up to $5,000 per year and select from the eligible low-cost index fund options.
Because enrollment mechanics are still being finalized by the Treasury and IRS, confirm the current Form 4547 instructions and timeline on trumpaccounts.gov or IRS.gov before you file.
Are Trump Accounts worth it?
For most families, yes — a Trump Account is a low-cost, government-seeded head start with no downside to opening one. The question is whether it is the only thing you do.
The White House Council of Economic Advisers projected that with no contributions beyond the $1,000 seed, a child's account could reach roughly $5,800 by age 18 under a medium-return scenario. With maximum annual contributions, the same analysis projected balances over $300,000 by age 18. The lesson is that the seed alone is a nice gesture, but the contributions are what build real wealth.
For a family that owns a business, the smartest move is to treat the Trump Account as one bucket and pair it with paying your kids. The payroll strategy creates the earned income that unlocks the tax-free Roth IRA, generates a current-year tax deduction, and can fund the Trump Account too. That combination compounds faster and more tax-efficiently than the Trump Account on its own.
Frequently Asked Questions
What is a Trump Account in simple terms?
A Trump Account is a tax-deferred investment account for a child under 18, created by the One Big Beautiful Bill Act in 2025. Kids born 2025-2028 get a $1,000 government seed, and families can add up to $5,000 a year.
Can my child get the $1,000 if they were born before 2025?
No. The $1,000 government seed is only for U.S. citizen children born between January 1, 2025, and December 31, 2028. Older children can still open and fund a Trump Account, just without the seed. Some children age 10 and under in lower-income ZIP codes may qualify for a $250 charitable deposit from the Dell Foundation.
Is a Trump Account better than a Roth IRA for my kid?
They do different jobs. A Trump Account grows tax-deferred and needs no earned income. A custodial Roth IRA grows tax-free but requires the child to have earned income. If your child has a job or you put them on payroll, the Roth is more tax-efficient, and you can use both.
Can you convert a Trump Account to a Roth IRA?
Yes. On January 1 of the year the child turns 18, the Trump Account becomes a traditional IRA, which can then be converted to a Roth IRA. Because individual contributions go in after-tax, only the growth is taxable on conversion. Converting in a low-income year keeps the tax low, but watch the Kiddie Tax, which can tax a full-time student's conversion at the parents' rate through age 23. Converting in small annual amounts, or waiting until the child is no longer subject to the Kiddie Tax, keeps it efficient.
Do you need earned income to open a Trump Account?
No. Unlike a Roth IRA, a Trump Account has no earned income requirement. Almost any adult can contribute on the child's behalf, up to the $5,000 annual limit.
How does paying my kids help if Trump Accounts do not require earned income?
Paying your kids through your business creates earned income, which unlocks a tax-free custodial Roth IRA, gives you a business deduction, and carries no FICA or FUTA for a child under 18 in a sole proprietorship or family partnership. That earned income can fund both the Roth and the Trump Account.
When do Trump Accounts launch?
Trump Accounts are slated to launch around July 4, 2026. The Treasury will administer the initial accounts, and the $1,000 government seed deposits begin after that launch date.
Sources
- One Big Beautiful Bill Act (OBBBA), 2025: establishing legislation for Trump Accounts
- U.S. Treasury and IRS guidance on Trump Accounts: IRS.gov
- IRS Form 4547: election to open a Trump Account and claim the pilot contribution
- Congressional Research Service, "Trump Accounts: Overview and Policy Considerations" (R48910), 2026
- White House Council of Economic Advisers, "Trump Accounts Give the Next Generation a Jump-Start on Saving" (August 2025): WhiteHouse.gov
- IRC §1(g): Kiddie Tax on a child's net unearned income above the annual threshold
- IRC §3121(b)(3)(A): FICA exemption for children employed by a parent's business
- IRC §73: Earned income of a child taxed to the child; Kiddie Tax exception for earned income
- IRS Publication 929: Tax Rules for Children and Dependents
This content is for educational purposes only and does not constitute tax, legal, or financial advice. Tax laws are complex and individual circumstances vary. Always consult a qualified CPA or tax attorney before implementing any tax strategy. Kids Payroll is operated by Agents Invest LLC and is not a CPA firm, law firm, or registered tax preparer.