Trump Accounts: How Your Baby Could Qualify for $1,000 and Build Wealth Through New Government Program

Children born before 2025 will not be eligible for the $1,000 incentive under the new "Trump Accounts" program.

Washington:

Wealthy children often receive trust funds when they leave home, while those from less affluent backgrounds may receive nothing or even be expected to support their families upon reaching adulthood.

But what if every child, regardless of financial background, could receive a financial head start at age 18?

This is the concept behind "Trump Accounts," a provision in President Donald Trump's recently enacted tax legislation. The law provides $1,000 to each newborn American citizen whose parents establish an account. This money is invested in the stock market by private financial institutions, with funds becoming accessible when the child turns 18. Parents of older children can open accounts too, but without the $1,000 initial contribution.

Supporters view this initiative as strengthening capitalism and helping children from lower-income households build wealth during a time when socialist political candidates are gaining popularity.

The program offers the $1,000 bonus exclusively to babies born during the Trump administration's calendar years. Additionally, through a significant donation announced by billionaires Michael and Susan Dell, children 10 and under living in ZIP codes with median family incomes of $150,000 or less may receive $250 in seed money if they aren't eligible for the Treasury's $1,000 contribution.

Here's essential information about Trump Accounts and how to claim them.

These accounts are new savings vehicles where funds are invested in the stock market on a child's behalf. The child cannot access these funds until reaching 18 years of age, and the money must be used for specific purposes such as education expenses, business startups, or home down payments.

After parents establish an account, the US Treasury contributes $1,000 for eligible newborns. Private financial institutions manage these funds, which must be invested in US equity index funds that track the stock market with annual fees not exceeding 0.10%.

Parents can contribute up to $2,500 annually in pretax income, similar to retirement account contributions. Employers, relatives, friends, local governments, and charitable organizations can also contribute. Annual contributions are capped at $5,000, though contributions from governments and charities don't count toward this limit.

To qualify for the $1,000 seed money, babies must be US citizens with Social Security numbers, born between January 1, 2025, and December 31, 2028. Any parent, regardless of immigration status, can open an account for an eligible child.

It's important to understand that funds cannot be accessed until the child turns 18, except in rare circumstances, meaning the accounts won't help with immediate expenses. Withdrawals will be subject to taxation.

Children born before 2025 aren't eligible for the $1,000 incentive, but parents can still open accounts for children under 18. Parents can still make the $2,500 pretax annual contribution for these children, who may also benefit from the Dell donation if they're 10 or younger and live in qualifying ZIP codes.

The accounts won't accept contributions until July 2026. However, parents of eligible children can register now by completing IRS Form 4547, which was not yet available on the Trump Accounts website as of the announcement.

In May, registered parents will receive information about finalizing their accounts. The White House plans to launch a website in July where parents can register for these accounts.

Advocates believe these accounts will introduce more Americans to stock market investing and give children born into poverty an opportunity to benefit from market growth. They suggest that providing every newborn with $1,000 will help counter socialism's appeal while expanding wealth-building opportunities. Currently, about 58% of US households own stocks or bonds according to the SEC, though the wealthiest 1% control nearly half of all stock value.

Before the federal program, California, Connecticut, and the District of Columbia were testing "baby bonds" programs similar to Trump Accounts in some respects. Several other states, including Maryland, are considering similar initiatives.

However, those state programs specifically target youth in poverty, foster care, or children who lost parents to COVID-19, excluding wealthier children. They're also managed by state governments rather than private investment firms.

Critics argue that Trump Accounts do little to help children during their most vulnerable early years when poverty rates are highest. They also contend that these accounts don't offset cuts to other beneficial programs for young people and families, such as food assistance and Medicaid, which were reduced in the same tax bill that created these accounts.

Despite government contributions, critics maintain that Trump Accounts may actually widen wealth disparities. Affluent families able to make maximum pretax contributions will realize the greatest benefits, while less financially secure families who cannot afford additional contributions will see minimal gains. With a 7% annual return, the $1,000 initial contribution would grow to approximately $3,570 over 18 years.