As part of President Donald Trump's One Big Beautiful Bill, families with children under 8 will receive another way to invest in the stock market: Through Trump Accounts.
How it would work is that the Department of the Treasury will deposit $1,000 in a tax-preferred investment account for every baby born between January 1, 2025 and December 31, 2028.
To qualify for this incentive, your child needs to be a U.S. Citizen and parents should have Social Security Numbers, according to CNBC. Here's further breakdown of how the program works and how it compares to other options like 529 plans.
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Trump Accounts: How they work
The goal of these accounts is, once opened by the Treasury Department, to track a stock index, per Time. It means unlike 529 plans or Coverdell Education Savings Accounts, Trump Accounts don't allow you to choose your investments.
Meanwhile, families will have the option of contributing up to $5,000 of their post-tax dollars annually to build the fund. You can make contributions until your child reaches 18.
At 18, your child would be eligible to withdraw half of the funds in their Trump Account. Eligible withdrawals at this age include higher education expenses or credentials. At 25, they would have access to withdraw all funds in their account for eligible educational expenses or to start a business.
At 30, the purposes for withdrawal diversify. They could use it for higher education, a down payment on a home or certain expenses to start a business.
Michael and Susan Dell pledge $6.25 billion donation
One big question is how these accounts will receive funding. And one swift answer came today by way of Michael Dell, CEO of Dell Technologies, and his wife, Susan.
They announced they would pledge $6.25 billion for Trump accounts, which will help up to 25 million children fund their accounts with $250 a piece.
That pledge should help kickstart these accounts. Per Invest America, sign-ups for Trump accounts will begin on July 4, 2026.
Trump Account: Tax implications
When opening a college savings account for your child or grandchild, finding one that offers you some tax incentives is paramount to growing your earnings while not being left on the hook with a higher tax debt after withdrawals.
This is one area where Trump Accounts meet some challenges. First, any contributions you make to the plan are not tax-deductible. 529 plans work the same way on the federal level, but many states do offer tax credits you can use on your state return.
Next, any distributions made from Trump Accounts for qualified expenses fall under the long-term capital gains rate. If you withdraw money for any other purpose, the government taxes it as ordinary income with an additional 10% penalty.
And states can also tax those distributions. So, on top of having to pay federal tax on distributions, which is something you wouldn't have to worry about with qualified withdrawals under 529 plans, you would also have to pay state taxes, where applicable.
Trump Accounts vs other college savings
One of the best ways to determine if a Trump Account would be the right approach for your family is to compare it to other options:
Accounts | Max annual contribution | Federal tax credit eligible for contributions | State tax credit eligible for contributions | Taxes on withdrawls | Choose your investments |
|---|---|---|---|---|---|
Trump Accounts | $5,000 | No | No | Long-term capital gains tax | No |
529 plans | $19,000 for single filers, $38,000 for married | No | Yes | Federal, state tax exempt for qualified expenses | Yes |
Coverdell Education Savings Account | $2,000 | No | Yes, some states offer tax credits | Federal, state tax exempt for qualified expenses | Yes |
As you can see Trump Accounts come with strings attached. Not only can you not choose your investments, like you can with other college savings options, your disbursements are subject to federal and state tax.
Trump Accounts: Pros and cons
Here are some pros and cons to consider:
Pros:
- $1,000 to fund your child's future
- Contribute up to $5,000 annually
- Your child can use funds for college, to start a business or make a down payment on a home
- The Milken Institute estimates $1,000 invested in a broad-based equity index fund of U.S. companies would earn $8,000 in 20 years
Cons:
- You can't choose your investment options
- Withdrawals are taxed on the federal and state level
- Limited options for disbursement without additional 10% tax penalty
- These accounts are overly complicated and can be difficult for families to understand how they work
- This program could cost more than $3 billion annually, per Time
The bottom line on Trump Accounts
President Donald Trump's One Big Beautiful Bill includes a provision for helping families kickstart their babies' financial future through Trump Accounts.
How it works is the Treasury will open accounts for eligible children and deposit $1,000. Families can make up to $5,000 in annual contributions, which your children can use for educational expenses starting at 18.
Is it the best option available? No. 529 plans offer more flexibility in investment options; you'll have higher annual contribution limits and eligible withdrawals are exempt from federal taxes. That said, free money is free money, and if invested well, a Trump Account could help fund your child's future educational plans.
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