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Introducing Trump Accounts: What Taxpayers Need to Know About the New Child Investment Accounts

The recently enacted One Big Beautiful Bill Act (OBBBA) has introduced a new savings vehicle for families: the Trump Account. At Nyra Eason, CPA, LLC, we want to ensure our clients and readers understand the key features, tax implications, and planning opportunities associated with these accounts, which are set to become available starting in 2026.

What Are Trump Accounts?

Trump Accounts are a new type of individual retirement account (IRA) designed specifically for children under the age of 18. These accounts are established for the exclusive benefit of an eligible child and are subject to special rules until the child reaches adulthood. The primary goal is to encourage long-term savings and investment for children, with the added incentive of a government-funded initial contribution for certain newborns.

Who Is Eligible?

Eligible Individual: Any child who has not turned 18 and who has a Social Security number by the end of the calendar year that the account is opened.

Automatic Enrollment for Newborns: U.S. children born between January 1, 2025, and December 31, 2028, are eligible for a one-time $1,000 government contribution, provided an election is made and the child has a Social Security number.

How Are Trump Accounts Established?

Election Process: A parent, legal guardian, adult sibling, or grandparent can elect to open a Trump Account for an eligible child. The IRS will provide Form 4547 and an online portal (trumpaccounts.gov) for this purpose.

Account Creation: The Secretary of the Treasury will create or organize the initial account for each eligible child. Only one account per child is permitted.

Contributions: Limits and Sources

Annual Contribution Limit: Up to $5,000 per year can be contributed from all sources other than exempt contributions.

Exempt Contributions: These include the $1,000 government pilot program contribution, qualified general contributions from states or charities, and qualified rollovers. These do not count against the $5,000 annual limit.

Employer Contributions: Employers can contribute up to $2,500 per year to the accounts of employees or their dependents, which is excluded from the employee’s gross income and counts toward the $5,000 annual limit.

Withdrawals and Distributions

No Withdrawals Before Age 18: Distributions are generally not allowed before the calendar year in which the child turns 18, except for rollovers, excess contributions, or upon the account beneficiary’s death.

After Age 18: The account operates under traditional IRA rules. Withdrawals are taxed as ordinary income, except for amounts attributable to after-tax contributions (basis). Early withdrawals (before age 59½) are subject to a 10% penalty unless an exception applies (e.g., higher education expenses, first-time home purchase up to $10,000, disability, certain medical expenses, etc.).

Tax Treatment

No Deduction for Contributions: Contributions to Trump Accounts are not deductible for federal income tax purposes.

Tax-Deferred Growth: Earnings grow tax-deferred until withdrawn.

Taxation of Distributions: After age 18, distributions are taxed as ordinary income, except for the portion representing after-tax contributions (basis), which is not taxed.

Employer Contributions: Not included in the employee’s gross income.

Qualified General Contributions and Government Contributions: Not included in the child’s gross income and do not create basis in the account.

Planning Considerations

Coordination with Other Accounts: Contributions to Trump Accounts do not affect contribution limits for other IRAs. However, Trump Accounts cannot be converted to Roth IRAs or receive SEP/SIMPLE IRA contributions.

Education vs. Retirement Savings: While Trump Accounts can be used for higher education expenses (with penalty exceptions), 529 plans may offer more favorable tax treatment for education-specific savings.

Roth IRA Comparison: For children with earned income, Roth IRAs may provide greater long-term tax benefits, as qualified withdrawals are tax-free, unlike Trump Accounts, which are taxed on withdrawal.

Key Dates

Account Opening and Contributions: No contributions can be made before July 4, 2026.

Government $1,000 Contribution: Available for eligible children born 2025–2028, with elections beginning in 2026.

Action Steps for Nyra Eason, CPA, LLC Clients

1. Determine Eligibility: If your child was born or will be born between January 1, 2025, and December 31, 2028, prioritize the opening of the account to secure the $1,000 federal deposit.
2. Evaluate Employer Benefits: If you are an employer, explore the benefits of offering the $2,500 tax-free contribution as a valuable, modern benefit to attract and retain talent.
3. Review Your Tax Strategies: Contact our office to review your overall family savings strategy, including your current use of 529 plans, UGMAs/UTMAs, and Roth IRAs, to ensure the Trump Account fits seamlessly into your financial goals.

Professional Guidance

Eason CPA remains committed to navigating these complex changes on behalf of our clients. Our team continuously monitors the evolving tax landscape to provide strategic, informed guidance.

Contact Information

For personalized guidance:

• Schedule a consultation: https://koalendar.com/u/easoncpa-appointment
• Contact our office: (770) 474-0464

Disclaimer: This blog provides general information and should not be construed as specific tax advice. Individual consultation with a qualified tax professional is recommended for your specific situation.

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