Trump Accounts: How They Work and Key Details

The U.S. Department of the Treasury and the IRS recently released guidance on Trump Accounts, a newly created type of individual retirement account (IRA) designed for children. These accounts were introduced as part of the Working Families Tax Cuts, and IRS Notice 2025-68 provides the first detailed explanation of how they will work. Below is a straightforward look at the key features, rules, and considerations.

Purpose of Trump Accounts

Trump Accounts are intended to help children begin building long-term retirement savings from an early age. A parent or legal guardian can elect to establish an account for an eligible child who has not yet turned 18 in the year the election is made.

When Contributions Begin

Although accounts may be elected earlier, no contributions can be made until July 4, 2026.

Federal Pilot Program Contribution

The federal government will provide a one-time $1,000 contribution to the Trump Account of each eligible child:

• The child must be a U.S. citizen.

• They must be born between January 1, 2025 and December 31, 2028.

• A parent or guardian must complete the election to establish the account.

  
  

Who Can Contribute and How Much

Several types of contributions are allowed:

• Government entities and charities may make “qualified general contributions” to broad classes of beneficiaries.

• Parents, relatives, or other individuals may contribute up to $5,000 per year per child.

• Employers may contribute up to $2,500 per year for an employee or the employee’s dependent. These employer contributions count toward the $5,000 annual total but are not taxable income to the employee.

  
  

These annual limits will be indexed for inflation beginning after 2027.

Investment Requirements

Trump Account funds must be invested in mutual funds or ETFs that track the S&P 500 or another index primarily composed of U.S. equities. This rule is intended to provide broad exposure to the U.S. stock market.

Withdrawal Rules

Money in the account generally cannot be withdrawn until January 1 of the year the child turns 18. At that point, the account transitions into a traditional IRA, and standard IRA rules apply. While contributions made by parents and others are after-tax, the exact tax treatment of those contributions at withdrawal—particularly how basis will be tracked and recovered—remains subject to forthcoming IRS regulations. As a result, it is still TBD whether after-tax amounts will be fully returned tax-free. Early withdrawals before retirement age may still trigger taxes and penalties unless an exception applies.

Administration and Reporting

The IRS is developing Form 4547, which will be used to elect and establish a Trump Account and to enroll in the pilot program. The Treasury and IRS are also seeking comments from financial institutions, taxpayers, and other stakeholders as they refine the regulations.

Conclusion

Trump Accounts provide a way for children to begin saving for retirement early, with initial government contributions and clear rules on eligibility, contributions, and investments. Families may consider these accounts as part of a broader savings plan as IRS guidance continues to develop.

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The information provided in this blog post is intended for general informational purposes only and should not be construed as legal or tax advice. While every effort has been made to ensure the accuracy of the information, tax laws and regulations are subject to change, and individual circumstances may vary. For personalized advice and to ensure compliance with current tax laws, it is strongly recommended that you consult with a qualified tax professional, financial advisor, or legal counsel. The author and publisher of this blog assume no responsibility for any errors or omissions, or for any actions taken based on the information contained herein.