Trump Accounts Explained: What Parents Need to Know

What Is a Trump Account?

You may have seen headlines or been asked about a “Trump account” while filing your taxes. In this blog, we’ll walk through the purpose of the account, how it works, and the tax rules that apply.

Purpose

A Trump account is a tax-advantaged savings vehicle for children under the age of 18. It is designed to help jumpstart long-term savings and provide a financial foundation for a child’s future.

How Does a Trump Account Work?

It has been announced that Bank of New York Mellon (BNY) will serve as the financial agent, with Robinhood assisting in developing an app for managing Trump accounts.

Parents can open a Trump account for their child by filing Form 4547 along with their tax return. Although the paperwork can be submitted now, the official launch date for these accounts is July 4 of this year.

For children born between January 1, 2025, and December 31, 2028, the U.S. Treasury Department will make an initial $1,000 deposit to help fund the account.

Taxation and Rules

Parents may contribute up to $5,000 per year per child.

The account is held in the child’s name, with a parent acting as custodian until the child reaches age 18. At that point, the child assumes full control of the account.

Key tax considerations include:

• Contributions are not tax-deductible for parents

• Contributions are not considered income for the child

• Withdrawals are generally not permitted until age 59.5

• Early withdrawals may incur a 10% penalty, unless used for qualified expenses such as:

  • Education

  • First-time home purchase

  • Starting a business

• Withdrawals are taxed as ordinary income at the time they are taken

Should You Open a Trump Account for Your Child?

If you’re considering opening a Trump account for your child, we encourage you to reach out to our team at Aurora. While these accounts offer several potential benefits, it’s important to determine whether they align with your overall financial goals and situation.

We’re happy to help you evaluate whether this is the right fit for your family.