Trump Accounts: What You Need to Know

The One, Big, Beautiful Bill Act (P.L. 119-21), signed into law July 4, 2025, created a new tax-advantaged savings vehicle for children known as a “Trump Account” (IRC Section 530A). Contributions to these accounts began on July 4, 2026. Below is a summary of the eligibility rules, contribution limits and tax treatment to help you decide whether opening or funding an account makes sense for your family.

  1. What Is a Trump Account?

A Trump Account is a custodial-style traditional IRA established for the benefit of a child under age 18. During the child’s “growth period” (generally until the year the child turns 18), the account is subject to special restrictions on access, contributions, and investments. After the growth period ends, the account converts into a standard traditional IRA subject to ordinary IRA rules.

  1. Eligibility Criteria
  • Age: The account may be opened for a child who is 17 or younger as of December 31 of the year the election is made.
  • Social Security number: The child must have a Social Security number valid for employment, issued before the election to open the account.
  • Citizenship for the federal seed contribution: Children born between January 1, 2025, and December 31, 2028, who are U.S. citizens are eligible for a one-time $1,000 federal pilot-program contribution.
  • Qualifying child status: Eligibility for certain contributions may depend on whether the person opening the account expects the child to be their “qualifying child” for federal tax purposes.
  • Election required: An initial account is opened by filing an election (IRS Form 4547) on behalf of the eligible child.
  1. How to Open an Account

Trump Accounts are opened by filing IRS Form 4547, Trump Account Election(s), on behalf of the eligible child. Only an “authorized individual” may file – generally the child’s legal guardian, or if none exists, either parent, followed by an adult sibling or grandparent, in that priority order. The election must be filed on or before December 31 of the year the child turns 17.

There are three ways to file Form 4547:

  • Electronically with your federal income tax return – the fastest method, available when you e-file (requires an e-filed return).
  • Through your IRS Online Account – sign in (or create an account) at IRS.gov and submit Form

4547 electronically; you can also track the status of your election there.

  • By mail – send a paper Form 4547 to the IRS address used for your paper federal return (the “not enclosing a payment” address for your location).

The same Form 4547 is used to request the one-time $1,000 federal pilot contribution for eligible children. There is no fee to file the election or to open, activate, or maintain the account.

Official resources:

  • IRS Trump Accounts page (forms, instructions, and program updates) –

https://www.irs.gov/trumpaccounts

  • TrumpAccounts.gov (Treasury’s official portal for opening and managing an account) –

https://www.trumpaccounts.gov

 

  1. Who Can Contribute, and How Much
  • Individuals (parents, grandparents, other family members): after-tax, cash contributions only; not tax-deductible.
  • Individual and employer contributions are subject to a combined annual limit of $5,000 per

beneficiary for 2026 (indexed for inflation after 2027) – lower than the regular IRA limit.

  • Employers may contribute up to $2,500 (2026, indexed after 2027) per employee or employee’s dependent; these employer contributions are not taxable income to the employee and are deductible by the employer as compensation expense.
  • Nonprofits and governmental entities may also contribute, and their contributions are not subject to the $5,000 combined cap.
  1. Tax Treatment
  • Contributions: Individual contributions are made with after-tax dollars and are not deductible by the contributor or the beneficiary.
  • Growth: Investment earnings inside the account compound tax-deferred and are not taxed until withdrawn.
  • Withdrawals: Distributions are taxed similarly to a traditional IRA – the original contributed

principal is not taxed again, but earnings are taxed as ordinary income when withdrawn. Because contributions and earnings are tracked together, the tax treatment of any given distribution can be complex.

  • Early withdrawal penalty: Distributions taken before age 59½ are generally subject to a 10%

penalty, unless an exception applies (e.g., first-time home purchase, qualified education expenses, or disaster recovery), each subject to dollar limits.

  • Required minimum distributions: RMD rules apply once the account converts to a traditional IRA and the beneficiary reaches the applicable RMD age.
  • ABLE account rollover: In the year the beneficiary turns 17, eligible families may transfer Trump Account assets into an ABLE account without triggering the usual growth-period restrictions.
  1. Gift Tax Considerations

Because a Trump Account beneficiary generally cannot access funds during the growth period, questions arose over whether individual contributions qualify as “present interest” gifts eligible for the annual gift tax exclusion ($19,000 per recipient for 2026). On June 29, 2026, Treasury and the IRS issued Revenue Procedure 2026-25, providing a narrow safe harbor: contributions meeting specified requirements will be treated as completed, present-interest gifts, allowing the annual exclusion to apply and removing the need to file a gift tax return solely on account of the contribution. Not every contribution automatically qualifies – the safe harbor’s conditions should be reviewed before large or recurring contributions are made.

  1. Planning Considerations
  • Confirm the child meets the age and SSN requirements before filing an election.
  • We can help confirm who qualifies as the “authorized individual” and prepare or review Form 4547 alongside your annual tax return.
  • Coordinate contributions with other family gifting and 529 education-savings strategies, since

Trump Accounts serve a different purpose (retirement-style, tax-deferred growth) than 529 plans (tax-free growth for qualified education expenses).

  • Track contribution sources carefully (individual vs. employer vs. nonprofit/government) to stay

within applicable limits.

  • Review the Rev. Proc. 2026-25 safe harbor requirements with us before making contributions

intended to qualify for the annual gift tax exclusion.

  • Revisit beneficiary designations and distribution planning as the child approaches the end of the growth period, including the one-time ABLE account rollover option, if relevant.

 

Account rules are still being clarified through proposed and final Treasury regulations, and

additional guidance may affect the details above. Please contact our office to discuss how these

rules apply to your specific situation before opening or funding an account.

Share:

More Posts