A Trump Account is a tax-advantaged savings account for a child's future expenses

A Trump Account (officially called a Coverdell Education Savings Account, or ESA) is a savings account you open in a child's name to set aside money for education and certain other costs. You contribute after-tax dollars, but the money grows tax-free, and withdrawals for may have access to expenses are not taxed. The account is held in the child's name, though a parent or guardian controls it until the child reaches age of majority.

The key difference from a regular savings account is the tax treatment: earnings inside the account accumulate without being taxed each year, and you pay no tax on the withdrawal itself if you use the money for the right purposes. This makes it a way to save more efficiently than putting money in your own account and paying tax on the interest or investment gains annually.

Unlike a 529 plan, which is limited to education expenses, a Trump Account can also cover certain non-education costs for the child, including music lessons, tutoring, computers, and other enrichment. However, the contribution limits are lower, and the account must be spent by the time the child turns 30.

Key Takeaways

  • You can contribute up to $2,000 per year per child to a Trump Account, though this limit may change and varies by your income level in some cases.
  • Money in the account grows tax-free and withdrawals for education or may have access to expenses are not taxed, but non-may have access to withdrawals are taxed and penalized.
  • The account must be fully distributed by the time the child turns 30, or remaining funds are taxed and penalized.
  • You can open a Trump Account at most banks, brokerages, and investment firms, and you choose how the money is invested within the account.
  • If the child does not use the money by age 30, you can roll the remaining balance into a 529 plan for a sibling or transfer it to the child's own 529 plan in some cases.

Who can open a Trump Account and contribute

Any adult—parent, grandparent, aunt, uncle, or family friend—can open a Trump Account for a child under age 18. You do not have to be related to the child. The account is opened in the child's name, and you will need the child's Social Security number and date of birth to set it up.

There are income limits on who can contribute. If your modified adjusted gross income exceeds a certain threshold (which changes each year), your contribution limit is reduced. For 2024, the phase-out begins at $110,000 for single filers and $220,000 for married couples filing jointly, though these figures change annually. If your income is above the upper limit, you cannot contribute that year.

You can contribute to multiple children's accounts, and multiple people can contribute to the same child's account in the same year, as long as the total does not exceed $2,000 per child per year.

How much you can contribute each year

The annual contribution limit is $2,000 per child per year. This is a combined limit across all Trump Accounts opened for that child—if you open one account and your spouse opens another, you still cannot put in more than $2,000 total per year for that child.

Contributions are made with after-tax money, meaning you do not get a tax deduction for putting money in. However, the growth inside the account is tax-free, which is where the benefit comes in. If you contribute $2,000 and it grows to $3,000 over five years, you owe no tax on that $1,000 gain.

You do not have to contribute the full $2,000 every year. You can contribute less, or skip a year entirely. Unused contribution room does not roll over to the next year—if you do not use your $2,000 limit in one year, you cannot contribute $4,000 the next year.

What you can use the money for without penalty

Withdrawals are tax-free and penalty-free if used for may have access to education expenses, which include tuition, fees, books, supplies, and equipment required for enrollment at an accredited school (K–12 or college). Room and board at college counts if the student is at least a half-time student. Computer equipment and internet access also may have access to.

Beyond education, you can withdraw money tax-free for may have access to non-education expenses that directly benefit the child's development, such as music lessons, art classes, tutoring, sports equipment, and summer camps. The rules are broader than a 529 plan, but the IRS still requires that expenses be for the child's benefit and not general family expenses.

If you withdraw money for a non-may have access to purpose—such as a family vacation or paying off a parent's debt—the earnings portion of the withdrawal is taxed as ordinary income, and you also owe a 10% penalty on those earnings. The principal (your original contribution) can always be withdrawn tax-free.

What happens when the child turns 30

The account must be fully distributed by December 31 of the year the child turns 30. Any money remaining in the account after that date is subject to income tax and a 10% penalty on the earnings portion. This is a hard deadline—there is no extension or exception.

Before the deadline, you have a few options. You can withdraw the money and pay tax and penalty on any earnings used for non-may have access to purposes. You can roll the remaining balance into a 529 plan for the same child or a sibling, which avoids the penalty and allows the money to keep growing tax-free. Some states and plans allow this rollover; check with your plan provider about whether it is available.

If the child receives a scholarship, you can withdraw an amount equal to the scholarship without penalty (though earnings are still taxed). If the child attends a U.S. military academy, you can also withdraw without penalty.

How to open and manage a Trump Account

You can open a Trump Account at most banks, credit unions, brokerages, and investment companies. Common providers include Fidelity, Vanguard, Charles Schwab, and many local banks. There is no single federal registry—you choose where to open it based on the investment options and fees offered.

When you open the account, you decide how the money is invested: in a savings account earning interest, in mutual funds, in stocks, or in a mix. The account custodian (the bank or brokerage) holds the account in the child's name, but you control it as the account owner or designated adult until the child reaches age of majority (usually 18 or 21, depending on state law).

You receive an annual statement showing contributions, earnings, and withdrawals. You are responsible for tracking which withdrawals are may have access to and which are not, because the IRS does not automatically know. Keep receipts and documentation for any withdrawal you claim is for a may have access to expense, in case of an audit.

Trump Accounts versus 529 plans

Both Trump Accounts and 529 plans offer tax-free growth and tax-free withdrawals for education expenses. The main differences are contribution limits, flexibility, and the age deadline. A Trump Account has a $2,000 annual limit and must be spent by age 30. A 529 plan has much higher contribution limits (often $235,000 or more per child, depending on the state plan) and no age deadline—the money can sit in the account indefinitely or be used for graduate school.

A 529 plan is also more restrictive on what counts as a may have access to expense—primarily education-related costs. A Trump Account allows a broader range of enrichment expenses like music lessons and tutoring. If you have a small amount to save and want flexibility on how it is used, a Trump Account may fit better. If you are saving a large amount for college, a 529 plan usually makes more sense.

You can use both accounts for the same child. Money in a Trump Account does not affect how much you can contribute to a 529 plan, and vice versa.

Frequently Asked Questions

Can I change my mind and withdraw money early?

Yes, you can withdraw money at any time. If you withdraw for a non-may have access to purpose, you owe income tax on the earnings portion plus a 10% penalty. The principal (your original contribution) comes out tax-free. If you withdraw for a may have access to expense, there is no tax or penalty.

What happens if the child does not go to college?

The money can still be used for may have access to non-education expenses like tutoring, music lessons, or sports programs. If none of those apply and you do not use the money by age 30, you will owe tax and penalty on the earnings. You can also roll the balance into a 529 plan for a sibling before the deadline.

Does a Trump Account affect financial aid or benefits?

Yes. Money in a Trump Account in the child's name is counted as the child's asset on the FAFSA (Free Application for Federal Student Aid), which can reduce the amount of need-based aid the child is offered. A 529 plan in a parent's name has less impact on aid calculations. This is an important factor if you expect to need financial aid.

Can I open a Trump Account for an adult child?

No. The account must be opened before the child turns 18. If you want to save for an adult's education or expenses, you would need to use a different savings vehicle, such as a 529 plan (which has no age limit) or a regular taxable investment account.

Who controls the money if the child reaches age of majority?

Once the child reaches the age of majority (usually 18 or 21, depending on state law), control of the account transfers to the child. At that point, the child can make withdrawal decisions. This is different from a 529 plan, where the account owner (usually the parent) retains control. If you want to maintain control longer, check your state's laws about custodial accounts.