What We Know: Trump Accounts
At this point, either through recent news coverage or through our own One Big Beautiful Bill update that we shared in July when the bill was first introduced, you have likely heard talk of the new "Trump Accounts for Kids." When that legislation first surfaced, there were a lot of unknowns - and there still are - but we have gained a lot of clarity on these accounts. Though we still have a lot to learn in regard to these accounts, we wanted to go ahead and get ahead of some of your questions and share what we know at this point.
Please note, however, that while current guidelines seem somewhat final, any and all of this is subject to change. We will do our best to keep you informed as new information develops.
What is a Trump Account?
At it’s core, a Trump Account is a tax-deferred investment account, similar to a traditional IRA, with a few unique tax advantages. Anyone under 18 (specifically, anyone who will not be 18 by the end of the year in which the account is opened) with a Social Security number is eligible to open an account. US citizens born between January 1, 2025 and December 31, 2028 are eligible to receive a $1,000 seed deposit into their account from the federal government.
Opening a Trump Account
An authorized individual can elect to establish a Trump account for a child by filing a Form 4547 with their 2025 tax return, or through an online portal that should be available mid-2026. Who is an authorized individual? It depends.
If we are only trying to open the account (no election to receive the $1,000 pilot program seed deposit), in order of priority, the authorized individual can be a:
- Legal guardian
- Parent
- Adult sibling
- Grandparent
If we are electing to open the account AND request the pilot program contribution, the authorized individual must be the person that anticipates the child will be his or her qualifying child for the tax year in which the election is made.
After the election is made using either Form 4547 or the soon-to-come online portal, the Treasury Department will send further information to filers. The activation of the account will require an authentication process before the account is opened. The Treasury Department will begin sending the information out in May 2026.
We don’t yet have final guidance on what the mechanics will look like after this point. We believe that these accounts will be held at a broker-dealer of the accountholder’s choosing, like LPL Financial, but the specifics of this part aren’t clear yet. We will be sure to keep you posted on updates as they develop.
Growth Period
After it’s opened, the Trump Account will enter the “growth period”. The growth period starts on the date the account is opened and ends on 12/31 of the year before the child turns 18. For example, a child born on October 1, 2025 would turn 18 on October 1, 2043. The last day of their growth period would be December 31, 2042.
During the growth period, there are a few special rules:
- The account must be invested in a low-cost index fund that tracks the S&P 500 or another index of primarily American equities.
- The account has a different contribution limit than IRAs (to be covered later).
- No tax deductions can be taken for contributions.
- Distributions are strictly prohibited except for a qualified trustee-to-trustee rollover to a Trump rollover account, distributions of excess contributions, and distributions in the event of the beneficiary’s death.
After the growth period ends, most of the special rules no longer apply, and the account is mostly governed by the same rules as a traditional IRA.
Contributions
No contributions can be made to a Trump Account before July 4th, 2026, including the $1,000 pilot program contribution. Contributions will be made on an after-tax basis (not Roth) with an annual cap of $5,000.
Up to $2,500 of that can be contributions made by the parent/guardian’s employer and not be included in the employee’s taxable income. Contributions are not includible in income by the account beneficiary.
From what we can tell, there are five types of contributions that can be made to Trump Accounts:
- The initial $1,000 pilot program contribution
- Qualified general contributions made by the federal or state governments, DC, Indian tribal governments, or charitable organizations
- Employer contributions
- Qualified rollover contributions
- Contributions made by the child, their parents, or anyone else
Of the above contribution types, only the last type will create basis in the account. The contribution and any earnings on the first four types will be taxable to the beneficiary upon distribution.
As of today, it does not appear that contributions from the pilot program, qualified general contributions, or qualified rollovers will be subject to the annual contribution limit. The total of all other contributions (including employer contributions) during the growth period cannot exceed $5,000 annually. This limit is subject to an inflation adjustment after 2027.
Distributions
During the growth period, the only distributions that can be made are the following:
- Qualified rollover contributions to a rollover Trump account
- Qualified ABLE rollover contributions at age 17 to an ABLE account for the same beneficiary
- Distributions of excess contributions
- Distributions upon the death of the account beneficiary
After the growth period (December 31 of the year before the child turns 18), most of the rules that apply to traditional IRAs will generally apply to the Trump Account. This means that distributions from the Trump Account could be subject to the 10% additional tax penalty on early distributions, unless an exception applies with respect to the child (such as for distributions for higher education expenses or first home purchase).
Once the beneficiary turns 18, funds can be withdrawn without penalty (although part or all may be subject to income taxation) for specific uses:
- Qualified birth and adoption expenses
- Disability
- Disaster recovery
- Qualified higher education expenses
- Qualified first-time home purchase
- Terminal illness
Withdrawals for any other nonqualified purpose will be subject to ordinary income tax plus a 10% penalty if taken before 59 ½. After age 59 ½, distributions are taxed at ordinary income tax rates.
Final Thoughts
Although there are a lot of things still up in the air that we are awaiting final guidance on, we wanted to try to preempt some of your questions and let you know everything that we do right now. As always, we will do our best to keep you up-to-date on the latest developments and how they might affect you and your planning.
If you have any questions or would like to discuss how Trump Accounts may affect you or those around you, please let us know.
Please note that information regarding Section 530A (Trump) accounts is still evolving and is not final. To ensure you receive the most updated information, please refer to IRS.gov or Trumpaccounts.gov.
