What are Trump Accounts for Children?
- 2 days ago
- 2 min read
A CPA’s Guide for Parents and Families
By Katie McClintock, CPA
A new type of investment account for children—often referred to as a “Trump Account”—has generated a lot of questions from parents.
Many clients are asking:
Is this a tax return for my child?
Do I need to file something separately?
Is this better than a 529 plan?
Let’s break this down in plain English.
What Is a “Trump Account”?
A “Trump Account” is a tax-advantaged investment account for children under age 18, designed to help families build long-term savings.
Think of it as a starter investment account for your child’s future, with some similarities to retirement accounts.
👉 Important:
This is not a tax return for your child.
It is an account you elect when filing your own taxes.
How Is It Set Up?
The account is typically established as part of your annual tax filing process.
A parent or guardian elects the account on their tax return
The child must have a valid Social Security number
The account is controlled by the parent/guardian until the child reaches adulthood
💰 Key Features
1. Initial Government Contribution
For certain eligible children (generally those born in a specific window), the government may contribute an initial $1,000 deposit.
2. Annual Contributions
Families can contribute up to approximately $5,000 per year.
In some cases, employers may also contribute additional funds.
3. Tax Treatment
Contributions are not tax-deductible
Growth is tax-deferred
Taxes are paid when funds are withdrawn later
This is similar to a traditional IRA structure, but designed for minors.
4. Access to Funds
Funds are generally restricted until the child turns 18
At that point, the child gains control of the account
Funds may be used for purposes such as:
Education
Starting a business
Other qualifying expenses
⚠️ Common Misunderstandings
Let’s clear up a few misconceptions we’re hearing frequently:
❌ “This is a tax filing for my child.”
→ No. It’s an account election on your return.
❌ “This is free money for all children.”
→ Only certain children qualify for the initial government deposit.
❌ “This replaces other savings options.”
→ Not necessarily—this should be evaluated alongside existing strategies.
How Does It Compare to Other Options?
Before opening one of these accounts, it’s important to compare it to:
529 Plans (education-focused, tax-free growth for qualified expenses)
Custodial Roth IRAs (excellent for children with earned income)
Traditional investment accounts
Each has different tax treatment, flexibility, and long-term benefits.
Is It Worth It?
For many families, this can be a useful long-term savings tool, especially if:
You plan to contribute consistently
Your child qualifies for the initial government deposit
You are already maximizing other tax-advantaged options
However, it is not a one-size-fits-all solution.
Final Thoughts
Like any tax or investment strategy, the value of a “Trump Account” depends on your overall financial plan.
If you’re considering opening one—or want to understand how it fits with your current strategy—I’m happy to help.
📞 Contact Us
McClintock & Associates CPA
Let’s make sure you’re keeping more of what you earn—while planning for your family’s future.