IRS sets the investment rules for Trump Accounts — and they're surprisingly simple

The Treasury Department and IRS are putting guardrails around how money inside new Trump Accounts can be invested — largely steering families toward low-cost U.S. stock-market index funds.

Why it matters: Trump Accounts could introduce millions of American children to investing at a very young age. The proposed rules released Aug. 20 provide financial institutions, parents and advisors with a clearer picture of what can — and cannot — be purchased inside these accounts while children are minors.

The big picture

Trump Accounts are a new type of traditional IRA for children created under the Working Families Tax Cuts.

Unlike a normal brokerage account, however, parents won’t have unlimited freedom to choose investments during the child’s “growth period.”

Treasury’s approach is essentially:

Keep it diversified. Keep it inexpensive. Keep it focused on long-term U.S. equity investing.

Under the proposed regulations, an eligible investment generally must be a mutual fund or exchange-traded fund (ETF) that:

Tracks an equity index consisting primarily of U.S. companies, such as the S&P 500;
Does not use leverage; and
Charges annual fees and expenses of no more than 0.10% of the investment balance.

That 0.10% ceiling is significant.

On a $10,000 account, that translates to no more than roughly $10 per year in fund expenses.

Why the government is restricting the investments

The structure makes Trump Accounts look less like children’s brokerage accounts and more like long-term, automated wealth-building vehicles.

Instead of parents trading individual stocks, cryptocurrencies or speculative investments, the rules are designed to push the money toward broadly diversified, low-cost funds.

IRS CEO Frank Bisignano said the objective is to encourage investments that can potentially compound tax-deferred over children’s lifetimes.

Between the lines: The government appears to be designing the accounts around one of the simplest principles in personal finance:

Start young + invest broadly + keep fees low + compound for decades.

There’s also a default investment

Parents won’t necessarily have to become investment experts.

If the beneficiary doesn’t select an eligible investment offered by the Trump Account trustee, the money will automatically be invested in an eligible investment selected by the trustee.

That could make the accounts behave somewhat like an automated retirement plan: money goes in, an eligible diversified investment is selected, and the account is allowed to grow.

The restrictions don’t last forever

The investment limitations apply during what the law calls the growth period.

That period begins when the child’s initial Trump Account is established and ends on Dec. 31 of the year in which the beneficiary turns 17.

After the growth period ends, these special eligible-investment restrictions no longer apply.

And beginning in the calendar year the beneficiary turns 18, the account generally starts operating under rules similar to those governing a traditional IRA.

Don’t forget the $1,000 government contribution

One of the most attention-grabbing features of Trump Accounts is the federal government’s pilot contribution.

A child generally can have a Trump Account opened if the child has a Social Security number and the election is made before the calendar year in which the child turns 18.

But a narrower group qualifies for the federal government’s $1,000 pilot contribution:

U.S. citizen children born from 2025 through 2028.

Parents and other authorized individuals can make the election using Form 4547, Trump Account Election(s) through the IRS Individual Online Account.

And families aren’t the only ones who can contribute

This is where Trump Accounts could become particularly interesting for tax professionals and small-business advisors.

Trump Accounts aren’t limited to the initial government contribution.

The broader rules contemplate contributions from parents and other sources, while employers can also contribute toward Trump Accounts for employees or their dependents.

The IRS says employer contributions can be as high as $2,500 per year, generally deductible by the employer and excluded from the employee’s taxable income, subject to the applicable Trump Account contribution rules and limits.

That potentially turns Trump Accounts into more than a family savings product.

They could become an employee benefit.

Why tax professionals should pay attention

Trump Accounts sit at the intersection of tax planning, retirement planning, employee benefits and generational wealth.

That creates several conversations tax professionals may increasingly have with clients:

For families:
“Does your child have a Trump Account?”

For parents of children born between 2025 and 2028:
“Did you elect the $1,000 federal contribution?”

For business owners:
“Should your company consider Trump Account contributions as an employee benefit?”

For wealth-planning clients:
“How does this account fit alongside a 529, custodial account, Roth IRA or other long-term savings strategy?”

The opportunity for advisors isn’t necessarily selecting investments — the government is intentionally making that part relatively simple.

The opportunity may be helping clients understand how the account fits into their broader tax and financial strategy.

Zoom out: The power is time

Consider the underlying economics.

A hypothetical $1,000 invested at birth earning an average 8% annually would grow to roughly:

Age 18: $4,000
Age 30: $10,000
Age 50: $47,000
Age 65: $149,000

Those figures are purely illustrative — markets don’t produce guaranteed 8% returns — but they demonstrate why starting an investment account at birth can matter.

Add ongoing family or employer contributions and the numbers can become substantially larger.

The biggest asset inside a Trump Account may therefore not be the government’s initial $1,000.

It’s potentially 60+ years of compounding.

Yes, but

These are proposed regulations, not the final word.

Treasury and the IRS are requesting additional public comments through Oct. 20, 2026, after already considering stakeholder comments submitted following earlier guidance in Notice 2025-68.

The proposed investment regulations generally would apply to tax years beginning on or after Jan. 1, 2026.

The bottom line

Trump Accounts are beginning to look less like another complicated tax incentive and more like a government-created long-term investing infrastructure for children.

The proposed investment rules reinforce that philosophy:

Low fees. Broad U.S. equity exposure. No leverage. Automatic investing. Decades of potential compounding.

For tax professionals, CPAs and financial advisors, that means Trump Accounts could become a standard part of the family financial-planning conversation — especially for clients with young children.

And for business advisors, the bigger opportunity may be helping employers understand how Trump Account contributions could eventually fit into their benefits strategy.

Go deeper: IRS: Proposed regulations on Trump Account investments