Congratulations! Your baby has a retirement account!
Yes, you read that right. And no, it’s not a meme. On July 4, 2025, a sweeping federal law introduced a new type of tax-advantaged savings account for children, known as the Trump Account. Created under the One Big Beautiful Bill, this account combines elements of IRAs and government seed programs.
Every eligible child born between 2025 and 2028 can receive a $1,000 federal deposit, and families, employers, and even nonprofits can contribute additional funds under a defined set of rules. For business owners and investors, it introduces potential opportunities and questions.
The following is a breakdown of five key considerations to help you decide what role, if any, Trump Accounts should play in your financial strategy or employee benefits planning.
What Exactly Is a Trump Account – and How Does It Work?
The Trump Account is a newly established retirement-style account for minors, created to promote long-term savings. It is similar to a traditional IRS in structure, but has distinct features:
- Eligibility: Available to any U.S. citizen under age 18, regardless of earned income.
- Tax treatment: Contributions are made with after-tax dollars; earnings grow tax-deferred. Withdrawals are taxed as income unless classified as “basis.”
- Access: Funds are locked until the child reaches the age of 18. Early withdrawals may trigger taxes and penalties unless used for certain qualified expenses.
Unlike Roth IRAs or 529 plans, the Trump Account doesn’t offer tax-free withdrawals. Instead, it aims to provide structured, long-term savings that can be used for education, home buying, or retirement (with limited investment choices restricted to low-cost, broad-based index funds).
For children born between 2025 and 2028, the government offers a one-time $1,000 deposit, but parents must opt in through a tax filing process to receive it.
Contribution Rules: Limits, Flexibility, and Compliance
Understanding who can contribute, and how much, is central to making Trump Accounts work.
- Annual limit: Up to $5,000 in regular contributions per child per year (indexed for inflation starting in 2028).
- Multiple contributors allowed: Parents, family members, employers, nonprofits, and government entities can all contribute within defined limits.
- Special exemptions: The $1,000 federal deposit and certain nonprofit or public contributions are excluded from the $5,000 cap.
Contributions from individuals are treated as after-tax basis and are not taxed when withdrawn. However, contributions from employers, the federal seed fund, or qualifying nonprofits are fully taxable to the beneficiary upon withdrawal.
One practical challenge: While the law allows many types of contributors, only the U.S. Treasury (or an approved custodian) can actually open the account. Parents can’t open one directly at their bank, and full implementation is delayed until mid-2026, pending regulatory guidance.
Employer Contributions: New Benefit Option or Administrative Burden?
The Trump Account introduces a new tax-free benefit category for employers: companies can contribute up to $2,500 per year per employee’s child, excluded from the employee’s income and payroll taxes.
This creates a potential tool for:
- Employee retention and recruitment (particularly for companies promoting family-friendly policies).
- Tax planning, as contributions are excluded from your employee’s gross income.
However, there are notable constraints:
- Employers must establish a formal contribution program that complies with nondiscrimination rules.
- Employers must offer contributions broadly, not just to executives or select employees.
- IRS reporting requirements are still forthcoming.
For large companies with established HR systems, this may be an easy addition. For smaller employers, particularly those with limited staff or administrative resources, it may be more complex.
Whether this becomes a widely adopted benefit depends on how easy the Treasury and payroll providers make it to administer in 2026 and beyond.
Personal Planning: New Tool for Wealth Building?
For business owners with children, the Trump Account offers an alternative approach to wealth building or investing in their child’s future. But the extent of usefulness depends on your broader goals.
Potential pros:
Early compounding: Contributions made at birth could grow significantly over decades if left untouched.
Structured gifting: For those who are already giving assets to their children, this account provides a clear, tax-deferred vehicle.
Government match: The $1,000 seed bonus effectively adds a 20% return on the first $5,000 contribution in the birth year.
Limitations to consider:
- No tax-free use for education as with 529 plans.
- Withdrawals are taxed unless clearly classified as basis (which requires tracking).
- Limited investment flexibility compared to custodial accounts or trusts.
Business owners structured as employees of their own company (S-corps, C-corps) may be able to use the employer contribution route, but only if applied equally to other staff. Solo-entrepreneurs may find it easier to contribute as a parent than navigate employer rules.
Bottom line: The Trump Account could be a helpful component of a broader wealth-building strategy for business owners and investors, but it’s not necessarily a replacement for 529s, UTMA accounts, or trusts.
Policy Outlook and Implementation
Although the law is in effect, Trump Accounts won’t be operational until mid-2026. The IRS and Treasury have until then to issue guidance on:
- How accounts are opened or assigned.
- How parents opt in to receive the $1,000 deposit.
- How employers can contribute and report those contributions.
- How compliance will be monitored.
Additionally, the $1,000 government deposit is currently a pilot program for children born between 2025 and 2028. Whether it continues beyond the stated window will depend on future Congressional action.
There is also room for state-level innovation or private foundation involvement: the law allows tax-exempt entities to make large-scale contributions to groups of children, which could spark community-based savings initiatives in the future.
For now, the account’s policy footprint is still evolving, and you may want to wait for additional clarity before integrating it into long-term planning.
Bottom Line
The Trump Account is a new savings vehicle with tax incentives and long-term goals. For some, it will serve as an early step toward building generational wealth or offering unique employee benefits.
However, it is not a one-size-fits-all solution. There are trade-offs, administrative requirements, and open questions that still need answers from the Treasury and IRS.
For business owners and investors, the best approach is to:
- Monitor regulatory updates through 2026.
- Evaluate how this fits into broader tax strategies for savings.
- Consult a tax strategist with a track record in wealth building to assess whether the Trump Account adds unique value or overlaps with existing tools.
Optimize Your Wealth-Building Strategy With Tax Goddess
Tax Goddess recently crossed $2 BILLION in total tax savings for clients. That’s right. Through advanced tax strategies, we have helped business owners and investors like you keep over $2 BILLION. That’s money back in the hands of real people with dreams of business expansion, building generational wealth, or enjoying early retirement.
Do you REEALLLY want to avoid taxes legally and pay the least amount possible without breaching compliance? Tax Goddess will help you achieve your tax-saving goals.
Would you like to get a sense of how Tax Goddess can help you save?
You can find out in a FREE CONSULTATION.
