“What is your take on the Trump accounts?”
Trump accounts are the new savings accounts for children created by the 2025 tax law, and a community member asked Laura point-blank for her take. She skipped the politics and graded them the way she grades every account: by the exit.
Quick answer: Worth using, with realistic expectations. It won’t be life-changing money, but Laura will take any vehicle that builds with a tax benefit later. The feature she likes about Trump accounts is flexibility at the exit: unlike a 529 that penalizes earnings pulled for anything other than education, a Trump account becomes an IRA-style account once the child is an adult, which leaves more options for how the money is eventually used.
Laura’s take isn’t political — she’s not weighing in on being for or against. As a CPA, she judges every account the same way: what can you do with the money at the end? “I’ll take anything that allows me to build money with a benefit later on.” The amounts involved aren’t tremendous, but the exit options are what make an account good or bad.
For years, families were trained to put money away for college. But many kids aren’t going to college anymore. With a 529, pulling earnings out for something that isn’t qualified education generally means income tax plus a penalty — with only limited exceptions, such as disability or scholarships (newer rules also allow limited rollovers to a Roth IRA). Money saved for a path the child doesn’t take can end up stuck.
A Roth IRA for a child (which requires the child to have earned income) is a powerful tool, but it’s built for retirement: outside of specific exceptions, what you can reasonably take out early is the contributions. That’s great for long-term growth and less great if your 22-year-old wants to buy a house or start a business.
If the child doesn’t go to college, what then? Trump accounts don’t lock the money into a single purpose the way a 529 does. As enacted, the account is generally treated like a traditional IRA once the child reaches adulthood, so it can keep growing tax-deferred, and the usual IRA rules — including exceptions for things like higher education and a first home, within limits — apply to withdrawals. Money taken early for other purposes is generally taxable and may be penalized, so it isn’t a free-for-all. But for Laura, that flexibility at the end is the main reason she likes these accounts.
Under the 2025 law, Trump accounts are for children under 18; families can contribute up to $5,000 a year (indexed), the money is invested in low-cost U.S. stock index funds, and it can’t be withdrawn before the child turns 18. Children born from 2025 through 2028 who are U.S. citizens with a Social Security number can also receive a one-time $1,000 federal pilot contribution. To open one, a parent or guardian makes the election on IRS Form 4547, which can be filed through your online IRS account. This is a brand-new account type and guidance is still evolving, so confirm the current rules before you contribute.
Official IRS reference: IRS — Trump Accounts
A tax-advantaged savings account for children created by the 2025 tax law. Families can contribute up to $5,000 a year (indexed), invested in U.S. stock index funds, with no withdrawals before age 18.
A 529 is built for education, and non-education withdrawals of earnings are generally taxed and penalized. A Trump account becomes an IRA-style account at adulthood, with the usual IRA options and exceptions.
Once it follows IRA rules, the first-time homebuyer exception may avoid the early-withdrawal penalty on up to $10,000, though income tax can still apply. Confirm current guidance first.
It can be a useful, flexible savings vehicle, especially if you’re unsure your child will go to college. Compare it with a 529 and a kid Roth IRA for your family’s goals.
These answers come from our monthly open Q&A. Only newsletter members get the invite (real tax strategy for business owners, twice a week, no fluff).
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Disclaimer: This article is for educational purposes only and is not tax, legal, or financial advice. Every situation is different — talk to a qualified professional about your specific facts before making any decisions.
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