Trump accounts aren't exactly 'tax-free,' as the president said. Here's how they work

In his State of the Union address, President Donald Trump described soon-to-launch Trump accounts as “tax-free investment accounts for every American child.”

“This is something that’s so special, has taken off and gone through the roof,” Trump said in the annual speech before Congress.

The accounts, created under Trump’s “big beautiful bill,” function largely like a traditional individual retirement account once a child turns age 18, according to December guidance from the U.S. Department of the Treasury and IRS.

The tax rules for Trump accounts are complicated, but they are taxed.

“There’s not really any sense in which Trump accounts are tax-free,” said Ben Henry-Moreland, senior financial planning nerd for advisor platform Kitces.com. “People pay tax on the dollars that they contribute to the account, and they pay tax on any additional growth when they withdraw from the account.”