Trump Accounts for Kids: How the New Children's Savings Account Works
The new federal tax law created a savings account for children called a Trump Account, with a $1,000 government seed contribution. Here is what Bay Area families need to know.
The new federal tax law created a new savings account for children, called a Trump Account. For Bay Area families with young kids, here is what the IRS has shared so far.
Government Seed Money
The federal government will make a one-time $1,000 contribution for each eligible child's account. This seed money is provided at no cost to the family.
Contributions
Individuals and employers may contribute up to $5,000 per year in total. Employers can contribute up to $2,500 per year toward an employee's or dependent's account. These employer contributions are generally deductible by the employer and excluded from the employee's taxable income. Business owners may want to consider this as a new workplace benefit.
Investments and Withdrawals
The money must be invested in certain mutual funds or ETFs that track a U.S. stock index, such as the S&P 500. Generally, funds cannot be withdrawn before the year the child turns 18, and after that the account is treated much like a traditional IRA.
How to Sign Up
Taxpayers can now view and submit Trump Account elections through their IRS Individual Online Account. The Treasury and IRS are still issuing rules on eligible investments and employer contributions, so some details may change as guidance is finalized.
Is It Right for Your Family?
A Trump Account is one option alongside 529 college savings plans and custodial accounts. Each has different tax treatment, flexibility, and rules for withdrawals:
- 529 plans offer tax-free growth for qualified education expenses and have no contribution limits set by the IRS
- Custodial accounts (UGMA/UTMA) are more flexible but do not offer the same tax advantages
- Trump Accounts offer a government seed contribution and employer contribution benefits, but restrict investments and limit early withdrawals
The right choice depends on your family's goals, income, and timeline. We can help you compare them.
Source: IRS, "Working Families Tax Cuts" provisions page and IR-2026-68 — irs.gov/newsroom
This article is for general information only and is not tax advice. Contact Bay Tax Services at (408) 378-9303 to discuss your situation.
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