WASHINGTON, D.C. — The Treasury Department and Internal Revenue Service last week proposed limiting investments in federally backed Trump Accounts for children to low-cost funds tracking predominantly U.S. stocks, establishing a 0.1% annual fee ceiling for accounts eligible for $1,000 government contributions.
The proposal would restrict investments during a child’s first 17 years to mutual funds or exchange-traded funds tied to equity indexes composed primarily of U.S. companies, such as the S&P 500. Eligible funds could not use leverage.
Annual fees and expenses could not exceed 0.1% of the amount invested, equivalent to $1 annually for every $1,000 held in a fund.
Trump Accounts are a new category of traditional individual retirement account established under the Working Families Tax Cuts. Investment earnings grow on a tax-deferred basis.
The investment restrictions would begin when a beneficiary’s initial account is established and continue through Dec. 31 of the year the child turns 17. After that growth period, the restrictions would no longer apply.
When an account beneficiary does not select an eligible investment offered by the trustee, the trustee would automatically place the money in a qualifying fund.
The proposed regulations also outline how trustees should determine whether investments meet the eligibility requirements and establish procedures for ensuring deposited funds remain appropriately invested.
IRS Chief Executive Officer Frank J. Bisignano described the proposal as guidance intended to encourage investments in “low-fee mutual funds and ETFs that will grow on a tax-deferred basis potentially over their entire lives.”
Parents, guardians and other authorized individuals can open an account for a child with a Social Security number by completing Form 4547 through an IRS Individual Online Account. The election must occur before the calendar year in which the child turns 18.
U.S. citizens born from 2025 through 2028 are eligible for a $1,000 pilot-program contribution if an authorized individual elects that payment on Form 4547.
Treasury and the IRS are accepting public comments on the proposed regulations through Oct. 20, 2026. The rules would generally apply to tax years beginning on or after Jan. 1, 2026.
Additional information is available at trumpaccounts.gov and IRS.gov.
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