TLDR Transcript: If you’ve been following financial news lately, you’ve likely heard about Trump Accounts—a new savings vehicle established under the One Big Beautiful Bill signed in July. With tax season underway, we’ve been fielding a lot of questions from clients about how these accounts work. Here’s what we know so far.
What Is a Trump Account?
A Trump Account is a federally backed savings account designed for children. For children born between 2025 and 2028, the federal government will deposit a $1,000 seed contribution to get the account started. Parents can then contribute up to an additional $5,000 per year, until the child turns 18.
How Do You Open One?
If your child was born in 2025, the first step is to file Form 4547 alongside your 2025 tax return. This is how you initiate the account through the tax filing process.
If you miss the tax filing deadline, don’t worry—you can also set up an account directly at trumpaccounts.gov.
Investment Options and Custodians
Once the account is open, funds can be invested in index funds. Under current rules, account holders will also have the option to transfer the account to a custodian of their choice, though the details around custodianship are still being finalized.
How Are Distributions Taxed?
Trump Accounts function similarly to a traditional IRA when it comes to distributions:
- Earnings grow tax-deferred, meaning you won’t pay taxes on growth until funds are withdrawn.
- Contributions are not tax-deductible.
- Withdrawals before age 59½ are subject to ordinary income tax plus a 10% early withdrawal penalty—with two notable exceptions:
- First-time home purchases
- Higher education expenses (e.g., college tuition)
- Withdrawals after age 59½ are taxed at ordinary income rates, but no penalty applies.
What If My Child Wasn’t Born Between 2025 and 2028?
The Dell Foundation has announced a $250 contribution for children who fall outside the pilot program’s birth year range, provided the child lives in a ZIP code with a median household income of $150,000 or less. This covers a broad portion of the country—for those in the Western New York area, only a handful of ZIP codes don’t qualify.
A few important caveats:
- This $250 contribution is available to the first 25 million enrollees. If funds remain after that threshold, eligibility may expand.
- The details of this contribution are still being finalized, and further guidance is expected.
Is It Worth It?
In short: yes—especially if your child qualifies for the $1,000 seed money. Free money is hard to argue with. Whether it makes sense to make additional contributions beyond that depends on your individual financial situation and the other savings options available to you, such as 529 plans or custodial accounts.
As with any financial decision, we recommend speaking with your financial advisor to determine whether a Trump Account aligns with your goals. Each savings vehicle has its own pros and cons, and the right choice will depend on your specific circumstances.
Stay tuned for our next post, where we’ll break down other child savings account options. In the meantime, feel free to reach out to our team at Buffalo First Wealth Management with any questions.