The OBBBA established a new tax-advantaged savings vehicle for children known as a “Child Investment Account” to provide children with a head start on long-term investing. Eligible children will automatically receive a one-time federal seed contribution of $1,000 into their account. After that, parents, guardians, relatives, and even employers may contribute up to $5,000 annually on behalf of the child. No withdrawals are permitted until the child turns 18; at that point the account converts to resemble a traditional Individual Retirement Account (IRA).
Accounts won’t be available until 2026, and the details of how the accounts will operate are still pending further guidance from the Internal Revenue Service. You can expect to be able to make contributions in July 2026.
| Eligibility / Opening Period | Child must be a U.S. citizen born between January 1, 2025 and December 31, 2028 and have a Social Security number. |
| Initial Government Seed | For each eligible child, the government will make a one-time $1,000 deposit to the account. If you don’t open an account, the government will open it and contribute the $1,000. |
| Annual Contribution Limits | Up to $5,000 per child per year from individuals (parents, relatives) until age 18. Employers may contribute up to $2,500 for the child of an employee. Details of employer contributions have yet to be finalized. |
| Withdrawals | No withdrawals before the child turns 18, with limited exceptions. After age 18, the account is treated like a traditional IRA. Withdrawals before age 59½ of the taxable portion may incur a 10% early withdrawal penalty (exceptions apply, e.g. for education, first-time home purchase). |
| Income Tax Treatment | Contributions by individuals are nondeductible (i.e. after tax). Earnings grow tax-deferred and are taxed as ordinary income on withdrawal. Principal is not taxed on withdrawal. The government seed money, charitable contributions, and employer contributions are taxed on withdrawal as ordinary income. |
| Gift Tax Treatment | Contributions to an account count towards the donor’s annual gift tax exclusion ($19,000 for 2025). |
| Investment Restrictions | Funds must be invested in a diversified U.S. equity index fund with very low expense ratio (≤ 0.10%). |
| Sunset / Duration | The law authorizes the program through 2028; it may expire after that unless extended. |
Next Steps: Planning Ahead for Your Child’s Future
The Child Investment Account program is one of the most meaningful long-term savings opportunities introduced under the OBBBA, but it comes with specific eligibility rules, strict investment requirements, and a limited window for participation. Understanding how these accounts work now can help families prepare before enrollment opens in 2026.
If you are expecting a child, have a child born between 2025 and 2028, or want to understand how these new accounts may fit into your broader estate and tax strategy, we can help you review your options and plan ahead with clarity.
Schedule a consultation today.
