Trump Account

Trump Account

The OBBBA establishes a new IRA-like account called the “Trump account,” effective for tax years beginning after December 31, 2025. The account is subject to special rules while the beneficiary is under age 18 but is otherwise treated the same as an IRA under IRC §408(a).Note: The Secretary of the Treasury is authorized to issue guidance on how to properly establish these accounts and what additional restrictions may apply. A Trump account cannot be a Roth IRA.

Until the child turns 18, investments are restricted essentially to low-fee U.S. stock index funds or similar investments.

Social Security Number Requirement

The child must have a Social Security Number. Unlike other OBBBA provisions, there is no requirement that the parents also have one.

Contributions

1) Pilot Program Contribution

Under new IRC §6434, taxpayers may elect to apply $1,000 of their tax liability to fund a Trump account for a qualifying child.

• A qualifying child is a U.S. citizen born between 2025 and 2028, for whom the election has never been made.

• The child must meet the “qualifying child” test under IRC §152(c).

• The Treasury Secretary will establish procedures for when and how to make the election.

• A Social Security Number is required for the child, but not for the parents.

• The $1,000 seed contribution is not a credit or offset and does not reduce the taxpayer’s other federal tax payments.

  
  

2) Additional Contributions

Additional contributions may come from parents, relatives, taxable entities, nonprofits, and government agencies.

• Contributions made before the child turns 18 (excluding employer contributions) must be after-tax and are capped at $5,000 per year (indexed for inflation beginning in 2028).

• The $5,000 limit does not apply to:• Qualified rollover contributions• Contributions from federal, state, local, or tribal governments• Certain contributions from tax-exempt organizations under Treasury programs

• Contributions from governments or §501(c)(3) organizations are excluded from the beneficiary’s income.

• Individuals may begin making contributions starting July 4, 2026 (12 months after enactment).

3) Rollover Contributions

Qualified rollover contributions are tax-free. These include:

• Direct trustee-to-trustee transfers between Trump accounts.

• Direct rollovers from a Trump account to an ABLE account for the same beneficiary, if made before the year the child turns 17.

  
  

4) Employer Contributions

Beginning in the 2026 tax year, employers may contribute to Trump accounts for employees or their dependents.

• Employer contributions made under a written Trump account plan (similar to IRC §129 educational assistance programs) are excluded from the employee’s income, up to $2,500 per year (indexed for inflation beginning in 2028).

  
  

Distributions

Funds cannot be withdrawn before the year the beneficiary turns 18. Withdrawals are taxed under IRC §72 like other IRA distributions.

• After-tax contributions from parents or relatives are not taxable upon withdrawal.

• The following amounts are considered “non-investment contributions” and are taxable when withdrawn:• Government or nonprofit contributions defined in IRC §530A(f)• The $1,000 seed contribution• Employer contributions excluded from income under IRC §128

  
  

Comment:

The original House version taxed certain withdrawals (for higher education, vocational training, business startup, or first-time home purchase) at long-term capital gains rates, but that provision was removed in the final bill.

Under IRC §72, some withdrawals are taxable, but the 10% early withdrawal penalty does not apply if funds are used for qualified higher education, first-time home purchase, health insurance premiums during unemployment, or other exceptions listed in IRC §72(t).

Because contributions are not deductible and account earnings are taxable, some taxpayers may find §529 plans or Roth IRAs more advantageous once their child starts earning income.

However, contributions to Trump accounts before age 18 do not count toward IRA limits, and withdrawals are treated separately from other IRA distributions. Therefore, taxpayers who have already maxed out §529 or IRA contributions may still consider using this account.