Trump Accounts are newly established tax‑deferred savings accounts for minors, structured as a special form of individual retirement account that parents, employers, and others can open for children under age 18 who have a valid U.S. Social Security number.

 

Eligible children born between January 1, 2025 and December 31, 2028 automatically receive a $1,000 seed deposit from the federal government. Children born outside that window may still open accounts, but they do not receive the government seed contribution.

 

Annual contributions are permitted up to $5,000 (after‑tax dollars), with up to $2,500 from an employer excluded from the employee’s taxable income. Funds grow tax‑deferred and must be invested in low‑cost U.S. stock index mutual funds or ETFs. 

Withdrawals are blocked before age 18; once the beneficiary reaches 18, the account essentially converts into a traditional IRA with standard income tax on withdrawals and penalties if funds are used prematurely except for permitted purposes.  Note - the contributions CAN be withdrawn tax free!

• Clear eligibility window: The $1,000 seed is available only for children born within 2025–2028.
• Investment mandate: Accounts must be invested in stock index funds rather than flexible brokerage options.  There is no self directing. 
• Allowed uses: After age 18, funds may be used for education, first‑time home purchase, startup capital, or retirement, following typical IRA rules.
• Employer contributions: Those up to $2,500 annually can be tax‑free to the employee, providing a potential fringe benefit tool for small businesses.  We DO NOT know yet if we can benefit our own family as business owners.  

It’s important to understand how Trump Accounts align or diverge from 529 plans, which remain a cornerstone for education savings.

• Purpose and tax treatment
  • Trump Accounts offer tax‑deferred growth; withdrawals are taxed as ordinary income under IRA rules.
  • 529 plans provide tax‑free growth and withdrawals, provided funds are used for qualified education expenses.
• Seed money and contribution limits
  • Trump Accounts include a unique $1,000 government seed for eligible births.
  • 529 plans offer no federal seed money, although many states provide tax incentives or matching contributions.
  • Trump Accounts cap at $5,000/year; 529 plans allow state‑based contribution limits that reach hundreds of thousands of dollars.
• Flexibility of use
  • Trump Accounts become general-purpose savings at age 18 (within IRA rules), usable for education, home purchase, business, or retirement.
  • 529 funds must be used for qualified education or face income‑tax on earnings plus a 10% penalty.
• Investment options and restrictions
  • Trump Accounts are limited to low-cost index investments.
  • 529 plans offer broader portfolios: age‑based funds, state funds, individual mutual fund choices, and sometimes direct-sold or advisor-sold options.

1. If your primary goal is education funding, particularly for college or K‑12 tuition:
   1. — A 529 plan is generally more tax-efficient because earnings and withdrawals are tax‑free when used for qualifying education expenses.
2. If you want flexible, long-term savings for your child—for education plus other goals later:
3.  — A Trump Account may be a useful supplement, especially since the employer contribution benefit and seed money are appealable. But be mindful that tax applies on withdrawals and investment risk exists.
4. For families expecting births in 2025–2028:
5.  — Act early to establish the Trump Account and capture the full $1,000 federal seed deposit.
6. For small business owners:
7.  — Consider offering employer contributions (up to $2,500) as a fringe‑benefit incentive to employees with newborns.  This is tax deductible to the employer and tax free to the EE. 
8. With both vehicles:
9.  — Using a 529 alongside a Trump Account can be a powerful dual strategy—tax‑free educational savings via the 529, and flexible long‑term savings or retirement capital via the Trump Account.

• Anomaly will monitor forthcoming IRS regulations in late 2025 or early 2026 that will define implementation details such as reporting, allowable distributions, and coordination with gift‑tax limits.
  
  

Putting it All Together
Trump Accounts are a new savings tool born from the final One Big Beautiful Bill Act, offering a modest federal seed amount, employer‑friendly features, and flexible long‑term uses. 

However, they are not a substitute for 529 plans when education is the target. At Anomaly, we recommend evaluating your priorities and often combining both vehicles for optimum tax efficiency and flexibility.

Any questions? As always let us know!