The $1,000 ‘Trump Accounts’ for newborns, Part 1

The federal government will make one-time contributions of $1,000 to private investment accounts, also known as “Trump Accounts,” for each newborn American baby born this year through 2028. The payments, part of the new tax law, are for U.S. citizens born this year through 2028. 

The idea is that the money will have many years to grow and help families get their children off to a strong economic start. About 3.6 million babies are born in the U.S. annually, potentially putting the tab at several billion dollars for each year that the seed money is provided.

Who is eligible?

• Any child under age 18 with a Social Security number can have a Trump Account.

• Only one Trump Account can be established per eligible child.

Contribution rules:

• Annual contributions are limited to $5,000 per year, per child, before the child turns 18. Funds provided by employers, up to $2,500 a year, won’t count as taxable income for the parents or children.

• No contributions are allowed until 12 months after the law’s enactment; therefore, the date would be July 4, 2026.

• Certain types of contributions (like rollovers) do not count toward the $5,000 limit.

• No deduction is allowed for contributions made before the child turns 18.

• Contributions made after the child’s 18th year generally follow traditional IRA rules. The money grows tax-deferred, and withdrawals are taxed as ordinary income.

The goal of this program is to encourage early, long-term investments for children, with strong oversight and limited early access to funds.

Barry Lisak is an IRS enrolled agent specializing in personal and small business taxes for 30 years. Any questions can be directed to him at 516-829-7283, or mrbarrytax@aol.com.