Trump Accounts Go Live With a $5,000 Annual Limit and a Tax Profile Unlike a 529 or Roth

Trump Accounts, the children's investment accounts created by the 2025 tax law, opened for contributions on July 4, 2026. The Treasury Department announced the launch along with the full version of its app, with investment tracking starting Monday, July 6. Treasury said on July 2 that families had already signed up more than six million children, and more than 50 companies have committed to contributing for employees' kids.

What changed

Until July 4, accounts could be opened but not funded. Now they can take money from several sources, each with its own rules:

• Family and other individuals: up to $5,000 a year in after-tax dollars, combined across all contributors, until the year before the child turns 18. The limit is indexed for inflation after 2027.
• Employers: up to $2,500 a year per employee, excluded from the worker's income and counted within the $5,000 limit.
• Treasury: a one-time $1,000 deposit for children born from 2025 through 2028.
• Charities and governments: qualified general contributions that do not count toward the $5,000 limit. Michael and Susan Dell's $6.25 billion pledge, for example, provides $250 to children born from 2016 through 2024 in ZIP codes with a median income of $150,000 or less, according to CNBC.

During the growth period, money must sit in low-cost mutual funds or ETFs tracking broad U.S. stock indexes, with no leverage and annual expenses of no more than 0.10%. Withdrawals are generally barred until the child reaches 18, after which traditional IRA rules apply, including a 10% penalty on most withdrawals before age 59 1/2.

Who is affected

Every family with a child under 18 who is a U.S. citizen with a Social Security number can open one, by filing IRS Form 4547 or enrolling at TrumpAccounts.gov. For affluent households, the question is not eligibility but where the account fits next to tools they already use. Employers face their own questions: Ropes & Gray notes that nondiscrimination rules modeled on dependent care assistance programs apply, including a test requiring that at least 55% of benefits go to employees who are not highly compensated, defined for 2026 as generally those who earned over $160,000 the prior year.

The after-tax math

The tax structure is a hybrid. According to Katz, Sapper & Miller, after-tax family contributions create basis that comes out tax-free. The Treasury seed money, employer and charitable contributions and all investment earnings are taxable when withdrawn, and Ropes & Gray notes gains are taxed as ordinary income.

Example: parents contribute $5,000 a year for 18 years, a total of $90,000, and the account, including a $1,000 Treasury deposit, is worth $250,000 when the child turns 18. The illustrative split looks like this:

That compares with a 529 plan, where growth is tax-free when used for qualified education, and a custodial Roth IRA, available only if the child has earned income, where qualified withdrawals are tax-free. The account's advantage is tax deferral for up to 18 years plus any free money from employers and Treasury. Its projections are sensitive to returns: TrumpAccounts.gov's figures assume the S&P 500's historical average of over 10% a year, while Morningstar's market simulations, cited by CNBC, average 6.3%.

Moves to discuss with your advisor

Households often start by capturing the money that costs nothing: the $1,000 seed for an eligible newborn and any employer contribution. Beyond that, families may compare a $5,000 contribution here with the same dollars in a 529 or a taxable account, keeping in mind the ordinary income treatment of growth. CNBC reports some advisors are looking at later converting the pretax portion to a Roth IRA. Grandparents funding accounts should know the IRS issued a gift tax safe harbor for contributions on June 29. These tradeoffs are worth reviewing with a CPA or financial planner.

What to watch

Treasury and the IRS have said more regulations are coming on contributions, investments, distributions and reporting, and employers are still waiting on guidance for payroll and W-2 treatment. Watch the list of employer matches and philanthropic pledges, which could make the accounts more valuable than the tax rules alone suggest.

After TAX is an independent publication. Articles are general information, not tax, legal or investment advice. Consult a licensed professional about your situation.