IRS proposes rules for eligible Trump Account investments

The Internal Revenue Service and the Treasury Department released proposed regulations Thursday on eligible investments for Trump Accounts, the new tax-deferred accounts for children born between Jan. 1, 2025 and Dec. 31, 2028.

The investment accounts were included as part of last year's One Big Beautiful Bill Act, which Republicans have rebranded as the Working Families Tax Cuts, and provide children with an initial $1,000 contribution from the government, but parents and employers can contribute further to the accounts, which are similar to IRAs. The Trump Accounts officially launched on July 4, and the IRS released proposed regulations earlier this month on employer contributions to the accounts.

Under the proposed regulations, funds in a Trump Account can only be invested in eligible investments during the growth period, which begins when the account beneficiary's initial Trump Account is established and ends on Dec. 31 of the calendar year in which the account beneficiary turns age 17. After the growth period, the eligible investment restrictions no longer apply.

For Trump Accounts, an eligible investment generally is a mutual fund or exchange-traded fund that tracks an equity index of primarily U.S. companies, such as the S&P 500 index, does not use leverage, and has annual fees and expenses of no more than 0.1 percent of the balance of the investment in the fund.

If an account beneficiary doesn't select an eligible investment offered by the trustee, funds in a Trump Account automatically will be invested during the growth period in an eligible investment selected by the trustee.

The proposed regulations provide rules for determining whether an investment is an eligible investment and procedures for a trustee to ensure that funds are invested in an eligible investment. The regulations generally would apply to tax years beginning on or after Jan. 1, 2026. 

"These proposed regulations will provide clarity for trustees and beneficiaries of Trump Accounts, thus encouraging eligible participants to invest in low-fee mutual funds and ETFs that will grow on a tax-deferred basis potentially over their entire lives," said IRS CEO Frank Bisignano in a statement Thursday. "Funds deposited in Trump Accounts enable American children to start investing now and enjoy years of compound earnings for their future college, retirement and other needs."

The proposed regulations take into account comments received from stakeholders on eligible investments in response to an earlier Notice 2025-68 that was issued last December.  

The Treasury and the IRS are also now asking for any additional comments from interested parties by Oct. 20, 2026. The complete instructions on submitting comments can be found in the proposed regulations.  

"Every dollar in a child's Trump Account should be working toward that child's financial future, not diminished by unnecessary fees," said Treasury Secretary Scott Bessent in a statement. "Under President Trump's leadership, Treasury is putting simple, commonsense protections in place to help families keep more of their investment returns."

The Treasury Department previously announced in July that the State Street SPDR Portfolio S&P 500 ETF (SPYM) would be the default investment for all Trump Accounts. The Treasury also announced four additional low-cost index ETFs that can be chosen for investment by a parent or other responsible party.

The Treasury cautioned that investment fees and expenses can materially reduce account balances over time, and its proposed guidance aims to support the long-term growth of children's Trump Accounts by limiting eligible investments to choices with low expense ratios and excluding products with excessive fees or unnecessarily complex strategies.

By emphasizing straightforward, low-cost investment options, the proposed guidance would enable children to benefit more fully from decades of compound growth and ensure a larger share of investment returns remain in their accounts.

The proposed guidance establishes a framework for the designation of eligible investments for future Trump Account trustees, including rollover trustees. Under the framework, an eligible index has to be designed primarily to measure the performance of a broad segment of the U.S. or global equity market using objective financial criteria.

This framework is intended to provide families with clear, transparent investment choices focused on cost, diversification, and long-term financial performance.

"For a child investing over decades, even small differences in annual costs may have a meaningful effect on the amount available in adulthood," Bisignano stated. "By emphasizing low-cost index investing, the proposed rules seek to maximize the share of investment returns that remains in each child's account."

Parents, guardians, and other authorized individuals, can use the IRS Individual Online Account to complete Form 4547, Trump Account Election(s) to open a Trump Account for a child with a Social Security number if the election is made before the calendar year in which the child turns age 18. If that child is a U.S. citizen born in 2025 through 2028, the parent or other individual who qualifies to make the election can check a box on Form 4547 to elect a $1,000 pilot program contribution for the child's Trump Account. Visit trumpaccounts.gov for more information.