What Are These Accounts?
A new type of tax-preferred savings account has been created to help families save for children. These accounts are structured like custodial IRAs under federal law, but they are not Roth IRAs and contributions are not tax-deductible. They are designed specifically for children, giving families a head start to build long-term savings and investment growth.
Under the 2025 federal law One Big Beautiful Bill Act (OBBBA), every U.S. child under age 18 with a valid Social Security number is eligible for a new tax-advantaged savings / investment account; often referred to as Trump Accounts.
Key Features
Eligibility: The account must be established before the child turns 18, and the child must have a Social Security number.
Note: Children born 2025–2028 will have accounts automatically created (unless families decline) for the $1,000 Treasury contribution; older children must have accounts opened manually by a parent or guardian.Contribution Limits: Up to $5,000 per year can be contributed by parents or relatives, with the limit indexed for inflation. Contributions are allowed until the year the child turns 18. Contributions cannot begin until July 4, 2026.
Employer Contributions: Employers can contribute up to $2,500 per year toward a child’s account. These contributions are not counted as gross income for either the child or the parent.
Other Contributors: Non-profits, governmental entities, and other organizations may contribute to these accounts. Their contributions are not subject to the $5,000 annual limit, but must be provided to all children within a “qualified group.”
Rollover Rules: Certain rollovers are permitted, following standard IRA rules.
Treasury Pilot Program
To encourage participation, a pilot program will provide $1,000 contributions from the Treasury to eligible children born between 2025 and 2028.
To receive the $1,000 credit, the parent must include both their Social Security number and the child’s on their tax return.
If an account hasn’t been set up when a parent files their tax return, the IRS will automatically create one and notify the taxpayer.
Parents do not need to take any action to open the account; the IRS will create it automatically when filing a tax return for eligible children.
- Families may decline the account if they wish.
Tax Treatment
Earnings: Growth within the account is tax-deferred until distribution.
Distributions: Generally, no withdrawals are allowed until the child reaches age 18. After that point, the account generally is treated as a traditional IRA and generally is subject to the same rules as other traditional IRAs.
Why It Matters
Provides a head start on long-term savings for children.
Multiple contribution sources — parents, relatives, employers, and organizations.
Earnings grow tax-deferred, allowing compounding over many years.
What to Watch
Contributions are after-tax, not deductible.
Money is generally locked until age 18.
Designed for long-term growth, not short-term expenses.
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