The IRS and Treasury Department have issued guidance on Trump accounts, a new type of individual retirement account (IRA) for children, the IRS said in a Dec. 2 statement.

The tax-advantaged Invest America accounts, commonly referred to as “Trump accounts,” were established under the One Big Beautiful Bill Act signed into law by President Donald Trump in July. The plan aims to provide every newborn child with a “head start toward lifelong financial security and the American Dream,” the White House said in a Dec. 2 statement.

Any child younger than 18 who is a U.S. citizen and has a valid Social Security number may open a Trump account. In addition, children born between Jan. 1, 2025, and Dec. 31, 2028, will receive a $1,000 initial seed contribution from the government, according to the joint guidance issued on Dec. 2.

“Families and others can contribute up to $5,000 annually,” the notice stated.

Once an account is created, the period prior to Jan. 1 of the year in which a child attains 18 years of age is considered the growth period. For instance, a child born on Oct. 1, 2026, will turn 18 on Oct. 1, 2044. The growth period in this case ends on Dec. 31, 2043.

The funds will remain private property under the control of a guardian until the child turns 18. According to the White House, the account can grow to as much as $1.9 million by the time that the child is 28 years old if fully funded and left untouched.

The Trump account can receive five types of contributions during its growth period: the initial $1,000 contribution made by the secretary of the Treasury; certain qualified general contributions made by states, tribal governments, or entities such as tax-exempt organizations; contributions made by the guardian’s employer; qualified rollover contributions; and receipts from other sources such as the account beneficiary and parents.

For contributions made by employers and receipts from other sources, there is an aggregate annual limit of $5,000. Contributions made by employers are specifically limited to $2,500 per year. The other three types of contributions are not subject to annual contribution limits.

The IRS said that annual contribution limits will be indexed to inflation, and will start adjustments after 2027.

“Contributions to a Trump account during the growth period are not includible in income by the account beneficiary when made,” the notice said. “Contributions to Trump accounts cannot be made before July 4, 2026.”

The funds in the account can be invested only in “eligible investments” during the growth period. This includes a mutual fund or exchange-traded fund that tracks stock indexes of mainly U.S. companies, such as the S&P 500. The account cannot use leverage in investments (borrowing money to invest), and annual fees and related expenses cannot exceeding 0.1 percent of the account balance.

During the growth period, no distributions can be made from the Trump account except under certain circumstances, such as a rollover or the death of the account beneficiary. In this period, the account is subject to certain reporting requirements. Failure to fulfill these requirements may incur penalties.

Once the growth period ends, distributions from Trump accounts are subject to rules that typically apply to traditional IRA accounts. In addition, reporting requirements will be similar.

The Treasury Department and the IRS have requested public comments on these regulations, which must be submitted by Feb. 20, 2026.

Growing Funds, College Assistance

In a May 15 post, the Institute for Family Studies criticized the plan, saying the accounts will not help parents meet expenses during their child’s growth years because the money can be withdrawn only after the child turns 18.

When the current Trump administration ends, the first babies in whose names the accounts would be opened “will still be at least 14 years from accessing their money,” it said.

“Very few low- to middle-income parents will have the financial stability to max out their annual contribution to the accounts, turning them into, essentially, another way for rich parents to reduce their tax burden when handing money off to their kids,” the Institute for Family Studies stated.

A June 12 analysis published by the Tax Law Center at the New York University School of Law raised concerns about how the funds in the Trump accounts will be invested.

The funds must be in a portfolio made up solely of corporate equities, which the center characterized as “high-risk” investments.

On a more positive note, Michael Piwowar, executive vice president at Milken Institute Finance, and Robert Shapiro, senior adviser at the institute, suggested that Trump accounts could assist minority children from low- and moderate-income families in attending college and graduating.

When children reach age 18, they can withdraw the funds for certain qualified purposes such as paying for tuition, starting a business, or purchasing a home.

Because the Trump accounts will automatically convert to traditional IRAs when the child turns 18, any unused funds in the account will keep growing over time.

On Dec. 2, billionaires Michael and Susan Dell pledged $6.25 billion to help 25 million American children open Trump accounts.

The Dells’ donation will give the first 25 million American children aged 10 and younger an additional $250 in their Trump accounts, provided that they live in ZIP codes with median incomes lower than $150,000, according to the White House.

“TWO GREAT PEOPLE,” Trump wrote in a Dec. 2 post on Truth Social, responding to the announcement. “I LOVE DELL!!!”

Correction: An earlier version of this article misstated the date when the growth period for a Trump account will end. The Epoch Times regrets the error.