Understanding Trump Accounts
Posted on December 15, 2025 |
Understanding Trump Accounts
The One Big Beautiful Bill Act (OBBBA) created a new savings vehicle for children under 18 known as a Trump Account. Designed to encourage early, tax advantaged savings, Trump accounts come with unique rules, distribution restrictions, and a pilot program for children born between 2025 and 2028.
In late 2025, the Internal Revenue Service (IRS) put out Notice 2025-68 providing additional details around how these accounts operate. Using this IRS notice as a framework, this article explains what Trump Accounts are, who is eligible, and the contributions and distribution rules. We outline how families can take advantage of their unique features that can help individuals make informed decisions about long-term tax and financial strategies.
What Is a Trump Account?
A Trump Account is a special type of savings account designed specifically for children and younger individuals under the age of 18 and does share a many of the same features of a traditional individual retirement account (IRA). The account is established for the exclusive benefit of an eligible individual and is subject to unique rules during a period known as the “growth period.” The growth period begins when the account is established and ends of December 31 of the year before they turn 18.
For example, if a child turns 18 in 2043, the growth period ends on December 31, 2042. After that, the account is generally treated like a traditional IRA, with some nuances.
The Trump Account program is scheduled to become available in mid-2026, with contributions beginning July 4, 2026.
Who Is Eligible For A Trump Account?
To be eligible for a Trump Account, the individual must:
- Be under age 18 at the end of the calendar year in which the account is established
- Have a valid Social Security number issued before the election to open the account, and
- Have an election made on their behalf (presumably by, e.g., a parent or legal guardian)
As of now, Parents or guardians can make the election to establish an account using a new IRS Form 4547 or potentially at a newly created website, www.trumpaccounts.gov.
Trump Account Contribution Rules
During the growth period, contributions to Trump Accounts can come from several sources including:
- A $1,000 pilot program contribution from the Secretary for eligible children, i.e., qualifying children born between 2025 and 2028
- Qualified general contributions from government or certain nonprofit organization
- Employer contributions (currently up to $2,500 per employee per year)
- Qualified rollover contributions
- Other sources, such as gifts from family members.
Most contributions are not included in the beneficiary’s income; certain contributions do not create basis in the account. There is a $5,000 annual limit per beneficiary, i.e., not per donor, for contributions during the growth period; this number is adjusted for inflation in the future. However the following contributions are not subject to an annual contribution limit:
- Pilot program contributions ($1,000)
- Qualified general contributions
- Qualified rollover contributions
Trump Account Distributions and Withdrawals
No distributions are allowed from a Trump Account during the growth period except for:
- Qualified rollovers
- Qualified ABLE account rollovers
- Removal of excess contributions, and
- Upon the death of the beneficiary.
Notably, hardship withdrawals are not currently permitted.
Notice 2025-68 explains that qualified rollover is a trustee-to-trustee transfer of the entire balance from one Trump Account to another Trump Account for the same account beneficiary. This type of rollover can only occur after the initial Trump Account is created by the Treasury Department or its agent, and only during the growth period. After the qualified rollover, the original (transferring) Trump Account must be closed within a reasonable period, and no new contributions can be made to it.
What Happens When the Beneficiary Turns 18?
After the growth period ends, which is January 1st of the year the beneficiary turns 18, standard IRA distribution rules apply. What that means practically is that the account beneficiary becomes the account owner, assuming control over the account and responsibility for reporting and taxes. Contributions and distributions fall under the rules that apply to traditional IRAs. For example, distributions are taxable in a pro rata manner (part after-tax principal, part pre-tax earnings) and a 10% penalty will apply to the earnings portion of any distribution unless the beneficiary is over the age of 59 ½ or an IRA early withdrawal penalty. Some exceptions do apply, such as the funds are to be used for qualified education expenses, up to $10,000 for a first-time home purchase, or funds are to be used to pay for health insurance premiums while unemployed.
Planning Considerations for Families and Employers
Trump Accounts introduce new planning opportunities for families with (or that will have) children under age 18. For children born in 2025 to 2028, prioritize setting up and account to get the government starter funds. Businesses can use the account contribution as a tax-free benefit to attract and retain younger employees.
Individuals should pay close attention to eligibility, annual contribution limits, and the specific reporting requirements during the growth period. Understanding these rules will help individuals maximize the benefits of Trump Accounts while avoiding potential tax issues. If you have questions about Trump accounts or how they fit into your broader tax or financial strategy, consult with your Topel Forman advisor.
https://www.irs.gov/pub/irs-drop/n-25-68.pdf.
