Trump Accounts
This guide is based upon OBBBA Sec 70204
Overview
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Effective: 2025 through 2028
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Maximum Annual Contribution: Annually, Birth Through 18
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Families: $5,000
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Section 501(c)(3) Charitable Organizations: No monetary limit, but not to individuals.
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Distributions: Not allowed until the First day of the calendar year in which account beneficiary attains age 18.
Related IRC and IRS Publications and Forms
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IRC Sec: 530A
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OBBBA Sec: 70204
Trump Accounts are a new kind of savings account designed to foster early savings and investment habits in children, with the hope that the child-beneficiary will eventually use the funds for higher education, to start a business or purchase a home. The accounts are administered by a bank or similar financial institution and the overall program is overseen by the Department of the Treasury.
Starting January 1, 2026, parents of any child under the age of 18 may open a Trump Account for their child. These accounts are eligible to receive contributions from parents, relatives, and other taxable entities as well as non-profit and government entities facilitated by the Treasury Department.
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Details and Structure:
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Formation: Treated like an IRA, the Trump Account can receive contributions until the year prior to the year the beneficiary turns 18, up to a maximum of $5,000 annually. Section 501(c)(3) charitable organizations can also contribute without being subject to this cap, provided they distribute contributions equitably based on criteria such as residence location or school districts (see below). Employer contributions are also allowed.
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Only one Trump Account is allowed per child.
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Investment Structure: The account must be a low-cost mutual fund or exchanged-traded fund invested in an equity index fund made up of mostly U.S. companies. The law specifies that the fund’s annual fees and expenses can be no more than 0.1 percent of the balance of the investment in the fund.
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Taxation: Since there is no tax deduction for contributions to a Trump Account, the amounts contributed won’t be taxed at distribution, but earnings will be (see Distributions below).
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Eligibility Requirements: To be eligible to open an account, the child mustmeet the following criteria:
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Be a U.S. citizen.
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Possess a Social Security number that would be considered work-eligible. The SSN is required before an election can be made to participate in a Trump Account.
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Annual Contributions:
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Families and friends can contribute up to $5,000 annually through the year before the child reaches 18. Contributions are expected to first be accepted by the plans starting 12 months after enactment of the OBBBA, which would be July 5, 2026.
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The $5,000 limit will be inflation-adjusted after 2026.
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Contributions to Trump Accounts must be made by the end of the tax year, unlike IRA contributions that can be made up to April 15 of the following year.
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Employers can contribute up to $2,500 (to be inflation-adjusted after 2027) for an employee or an employee’s dependent. The contribution amount is excluded from the employee’s income. A written plan similar to those for Code Sec. 129 dependent care assistance programs is required.
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Contributions provided to Trump Accounts from tax exempt entities, such as private foundations, are not subject to the $5,000 annual limit. These contributions from unrelated third parties must be provided to all children within a qualified group (i.e. all children in a state, specific school district or educational institution, etc.).
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The Trump Account can remain open after the child reaches age 18 and contributions can continue to be made but following the traditional IRA rules.
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No deduction is allowed under Sec 219 (IRA rules) for any contribution which is made before the first day of the calendar year in which the account beneficiary attains age 18.
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Distributions:
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No distributions are allowed before January 1 of the year the child turns 18. Exception:any distribution that is a qualified rollover contribution or qualified ABLE rollover contribution.
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In the year the child reaches age 18 the funds can be, but aren’t required to be, withdrawn for any use. Early versions of this provision would have placed stringent limits on withdrawals based on the beneficiary’s age and how the funds were used. These requirements were eliminated in the final bill.
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Taxation of the distribution is based on the rules of IRC Sec 72.For purposes of applying the section 72 distribution annuity rules to any amount distributed from a Trump Account, the investment in the contract shall not include--
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any qualified general contribution,
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any contribution provided under section 6434 (the pilot program discussed next), and
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the amount of any contribution which is excluded from gross income under section 128 (employer contributions to the Trump Account).
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Therefore, the portion of the distribution that represents contributions is tax-free, and earnings are subject to ordinary income tax and the 10% early distribution penalty, unless the funds aren’t withdrawn until the account beneficiary reaches age 59½ or an exception to the IRA early distribution penalty applies.
Code Sec 72 is applied separately for Trump Accounts and other IRAs.
California Differences
California has no equivalent accounts.