Trump Accounts and Other Investment Options for Children
The One Big Beautiful Bill Act has introduced a new type of investment account for minors known as Trump accounts, effective for tax years beginning after December 31, 2025. These accounts create exciting opportunities for parents, grandparents, and guardians to start tax-deferred investing for children from birth.
What Are Trump Accounts?
Trump accounts are similar to IRAs, but with some unique features:
- Contributions are generally after-tax, so you must track the basis.
⠀ - Pre-tax contributions are possible in two scenarios:
- Federal government pilot program: up to $1,000 per child.
- Employer benefit programs: up to $2,500 per year.
These accounts are exclusively available to children under 18, making them a valuable tool for early financial planning.
Comparing Investment Options for Minors
Children under 18 have four primary investment account options:
- Trump Accounts – Ideal for tax-deferred investing without a specific education goal.
⠀ - Roth IRAs – Best for working children with earned income; contributions grow tax-free, and withdrawals are tax-free after age 59½.
⠀ - 529 College Savings Accounts – Perfect for education-focused savings; distributions for qualified education expenses are tax-free.
⠀ - YUTMA Accounts – Allow children to access funds before 18, avoid ordinary income tax rates later, and invest in non-traditional assets.
No single account is universally best; the right choice depends on your child’s situation and family goals.
Examples
Example 1 – Newborn with Federal Seed Money:
A newborn in Los Angeles receives the $1,000 federal pilot program contribution. Opening a Trump account allows parents to immediately start tax-deferred investing, leveraging the government’s contribution for long-term growth.
Example 2 – Teenage YouTuber with Earned Income:
A 16-year-old content creator earning income from YouTube can contribute up to their earned income limit to a Roth IRA. This allows tax-free growth and withdrawals in the future, complementing any Trump account contributions.
Example 3 – Child-Focused Education Savings:
Parents planning for college can contribute to a 529 account. For example, an aspiring young musician enrolled in music lessons can grow contributions tax-free, provided they use the funds for qualifying education expenses.
Example 4 – Flexible Access with YUTMA Accounts:
If a family wants their child to access funds before age 18 or invest in alternative assets, a YUTMA account is ideal. For instance, parents of a young tech entrepreneur might use YUTMA funds for early investments in coding programs or business ventures.
Tips for Choosing the Right Account
- Maximize Available Contributions:
- Take advantage of federal pilot programs and employer contributions whenever possible.
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- Take advantage of federal pilot programs and employer contributions whenever possible.
- Consider the Child’s Earned Income:
- Roth IRA contributions are limited to earned income, but they offer tax-free growth.
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- Roth IRA contributions are limited to earned income, but they offer tax-free growth.
- Define Your Investment Goal:
- Education-focused: 529 accounts.
- Early tax-deferred investing: Trump accounts.
- Flexible access and non-traditional investments: YUTMA accounts.
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- Combine Accounts Strategically:
- It’s possible to contribute to both a Trump account and a Roth IRA in the same year, maximizing tax benefits and growth potential.
Why Work with a Los Angeles CPA
Navigating multiple investment accounts for minors, tracking basis, and optimizing contributions can be complex. Our team at Velin & Associates, Inc. specializes in helping:
- Creators and content professionals
- E-commerce business owners
- Medical professionals
- High-net-worth families
We ensure that investment strategies for minors are tax-efficient, compliant, and aligned with your family’s long-term financial goals.
For more information about our tax planning services, contact us today: visit our website.
Velin & Associates, Inc
8159 Santa Monica Blvd STE 198/200 West Hollywood, CA 90046
323-902-1000
dmitriy@losangelescpa.org
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