Trump accounts: What you should know

Tyler Kert
Tamarack Wealth Management

Trump Accounts have received a lot of attention since they were announced. The reason for the enthusiasm is fairly obvious - who doesn’t like free money? According to the U.S. Treasury Department, around 3 million children have already been signed up. If this is news to you, it’s not too late to sign up your own kids or tell your friends.

With the proposed July 4th funding date for these accounts just around the corner, there are many unanswered questions still floating around. Here is what we know so far.

Trump account basics

The federal government plans to deposit $1,000 into an account for every eligible child born between January 1, 2025 and December 31, 2028. As I mentioned, the first deposits are expected to arrive on July 4 of this year. The Trump Account program, technically known as a 530A account, allows parents or guardians to open an investment account for their child and potentially add additional contributions over time. That is one of the first key pieces of information - these accounts will not be established automatically. So how do parents sign up?

The first way to begin the process is to file IRS Form 4547 with your 2025 tax return. If you’ve already filed your return, but missed that form, you can also apply by going to trumpaccounts.gov and signing up there. At some point this spring, the government is expected to begin verifying those applications through an authentication process. Details on what the authentication process will look like are yet to be released. 

The $1,000 government deposit is just the beginning. Some companies have already announced plans to match the federal contribution for their employees’ children. Visa, Uber, and Chipotle, to name a few, have already issued statements that they will be contributing to these new accounts on behalf of their employees.

How the money will be invested

Once the accounts are funded by the government, how will they be invested? The answer to this question is still unclear. On the trumpaccounts.gov website, there are images of a Robinhood-like phone interface with well known individual stocks. But official guidance from the Treasury says the accounts will actually invest in broad U.S. stock market index funds, such as mutual funds or exchange-traded funds that track the market. Which one is true? We’ll have to wait and see. 

Who will manage the accounts?

People are also wondering which financial institution will serve as the custodian for these accounts. The Treasury has said the accounts will be held by a “designated financial agent,” but they haven’t specified who that will be yet. Once chosen, that institution would be responsible for managing the accounts and recordkeeping. 

That job could become fairly complex. Because Trump Accounts may include contributions from several different sources - the government, parents, employers, and even charities, the custodian will likely need to carefully track the tax status of each contribution.

Potential tax complications

Taxes are another area where we’d like to receive more clarity. Unlike some other savings vehicles, contributions to Trump Accounts can come from both after-tax and pre-tax sources. For example, the government’s $1,000 deposit is treated as pre-tax along with any employer contributions but parents contributions will be after-tax money. This begs the question, will the tax basis be tracked in these accounts? The answer to this question and others have not been provided yet.

The investments will grow tax-deferred, meaning families won’t pay taxes on the earnings each year. However, withdrawals later in life will likely be subject to income taxes. Recordkeeping will be important because withdrawals may need to distinguish between after-tax contributions and taxable earnings.

The bottom line

With several operational and tax questions left unanswered, one thing is clear: if your child qualifies for the $1,000 government contribution, you should take the time to open the account. After that, you can decide whether to add additional contributions once more information becomes available. Even though the details aren’t fully known, this remains a good opportunity for the youth of America. Time has proven itself one of the most valuable assets of any investor. These accounts have the potential to provide a much needed financial boost to the next generation.

This material is for informational purposes only and does not constitute financial, investment, or tax advice. Please consult your tax advisor or financial planner to discuss your specific circumstances before making any decisions. Securities offered through Cetera Wealth Services LLC, Member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.

Tyler Kert, a financial advisor and CPA, provides financial planning and tax consulting services at Tamarack Wealth Management in Cashmere, WA.