Insights

Trump Accounts | Savings Program for Kids Under OBBBA

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, created Trump Accounts, a new tax-deferred savings program for children under age 18, codified under IRC §530A.

A Trump Account functions similarly to a traditional IRA for minors, but unlike a traditional IRA, it does not require earned income to make contributions. In addition, eligible children born during the pilot period (2025-2028) may receive a one-time $1,000 federal seed contribution. Initially, these accounts are administered by the U.S. Treasury’s designated financial agent, with the ability to roll the account over to a private financial institution in the future. 

$1,000 Federal Seed Contribution – Eligibility Requirements

The federal government will make a one-time $1,000 contribution to a Trump Account for each eligible child.

To qualify, the child must:

  1. Be a U.S. citizen.
  2. Be born between January 1, 2025, and December 31, 2028.
  3. Have a valid Social Security number.
  4. Be expected to qualify as your dependent for purposes of the Child Tax Credit for the applicable tax year.
  5. Have Form 4547, Trump Account Election(s), filed with your 2025 federal income tax return, or, if the 2025 return has already been filed, submitted Form 4547 through the IRS Online Account portal (IRS.gov).

 Action Items:

  • Parents of an eligible child who is under age 18 but does not qualify for the $1,000 federal seed contribution (i.e., born before January 1, 2025) should file Form 4547 to make Election (a) only — to open the initial Trump Account under IRC §530A.
  • Parents of an eligible newborn born between January 1, 2025, and December 31, 2028, should file Form 4547 to make both Election (a) — to open the initial Trump Account — and Election (b) — to request the one-time $1,000 pilot program contribution under IRC §6434. There is no reason to leave the federal seed contribution on the table for an otherwise eligible child.

 Eligibility to Open a Trump Account

Any U.S. citizen child under age 18 with a valid Social Security number may open a Trump Account, regardless of family income or whether the child has earned income.

Children born before January 1, 2025, may still establish a Trump Account; however, they are not eligible for the federal $1,000 seed contribution. Certain private philanthropic organizations may offer supplemental seed contributions for these children, subject to program availability and eligibility requirements.

Contribution Rules

Contributor Annual Limit Tax Treatment
Parents, family members, friends, and other individuals Aggregate limit of $5,000 per year After-tax contributions; not deductible
Employers Up to $2,500 per year per employee (aggregated across all of the employee’s dependents — not $2,500 per child); counts toward the $5,000 annual limit Excluded from employee wages under IRC §128
Federal Government One-time $1,000 seed contribution Does not count toward the annual contribution limit; governed by IRC §6434
States, tribal governments, and qualified §501(c)(3) organizations No statutory dollar limit. Qualified general contributions must be made to a defined class of children — not to individually named beneficiaries. Excluded from beneficiary income under IRC §139J; does not count toward the annual contribution limit

 

IMPORTANT NOTES

  • Except for the federal seed contribution and qualified governmental or charitable contributions, cash contributions may not be made before July 4, 2026. The first eligible tax year for the $5,000 aggregate contribution is 2026.
  • Unlike traditional and Roth IRAs, Trump Account contributions must be made by December 31 of the tax year — the April 15 IRA contribution deadline does not apply.
  • Beginning after 2027, the annual $5,000 contribution limit will be indexed for inflation. 

Investment Requirements

Trump Accounts are designed to encourage long-term investing through diversified, low-cost investments.

Trump Account funds must be invested exclusively in mutual funds or ETFs that:

  • Track the S&P 500 or another qualified U.S. equity index composed primarily of U.S. companies;
  • Do not use leverage or borrowing to boost returns; and
  • Have annual expenses no greater than 0.10% (10 basis points) of the assets invested. 

Tax Treatment

Trump Accounts receive favorable tax treatment similar to that of a traditional IRA.

  • Investment earnings grow tax deferred.
  • Family and individual contributions are not tax-deductible.
  • Employer contributions made under IRC §128 are excluded from the employee’s federal gross income.
  • Withdrawals generally are not permitted before January 1 of the calendar year in which the child turns 18, except in limited circumstances such as:
    • Death of the beneficiary;
    • Correction of excess contributions;
    • Qualified rollover contributions; or
    • Qualified ABLE rollover contributions.

Beginning January 1 of the year the child turns 18, the account is treated as a traditional IRA.

  • Earnings and any pre-tax contributions are taxed as ordinary income when withdrawn.
  • After-tax contributions (i.e., basis) may be withdrawn tax-free.
  • Withdrawals made before age 59½ are generally subject to the 10% early distribution penalty under IRC §72(t), unless a statutory exception applies (such as qualified higher education expenses, first-time home purchase, birth or adoption expenses, or other applicable exceptions).

Gift Tax Treatment of Contributions

In Revenue Procedure 2026-25, the IRS established a gift tax reporting safe harbor for certain contributions to Trump Accounts. This guidance addresses concerns that contributions to a Trump Account could be treated as gifts of a future interest, which generally do not qualify for the annual gift tax exclusion and may require the donor to file a federal gift tax return.

Under the safe harbor, qualifying contributions to a Trump Account are treated as present-interest gifts eligible for the annual gift tax exclusion under IRC §2503(b). For 2026, the annual exclusion amount is $19,000 per donor, per beneficiary.

The safe harbor applies if all of the following conditions are satisfied:

  • The donor is an individual.
  • The donor’s only taxable gifts during the year are cash contributions (cash, check, money order, or electronic funds transfer) to one or more Trump Accounts, made before the beneficiary turns 18.
  • The donor’s total gifts to the beneficiary for the year do not exceed the annual gift tax exclusion.
  • The contribution does not result in any federal gift tax or generation-skipping transfer (GST) tax liability.
  • The donor is not otherwise required to file a federal gift tax return for that tax year.

When these conditions are met, individual donors who contribute to a Trump Account generally are not required to file Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return, solely because of the Trump Account contribution.

This safe harbor simplifies annual gifting to children and grandchildren through Trump Accounts and eliminates gift tax reporting for many routine contributions that qualify for the annual exclusion.

Failure to satisfy any one of the applicable conditions will cause all contributions to a Trump Account for that year to be treated as future-interest gifts, disqualifying them from the annual gift tax exclusion. For example, if a married couple files Form 709 to elect gift-splitting under IRC §2513, Condition 5 is not satisfied, and the gift tax reporting safe harbor is unavailable for that taxable year. Accordingly, this issue should be carefully considered and flagged for higher-net-worth clients, as it may have significant gift tax reporting implications.

California Conformity — SB 180 (Chapter 2026-85)

California enacted SB 180 (Chapter 2026-85), effective retroactively to January 1, 2026, conforming California personal income tax law to the federal income tax treatment of Trump Accounts under IRC §530A. Prior to SB 180, California did not conform to any aspect of the Trump Account regime because the OBBBA (P.L. 119-21, enacted July 4, 2025) was enacted after California’s specified date of conformity (January 1, 2025) under Cal. Rev. & Tax. Code §17024.5.

As a result of SB 180, for taxable years beginning on or after January 1, 2026, California generally conforms to the following federal treatments:

  • Tax-deferred inside-buildup — earnings within a Trump Account (interest, dividends, and capital gains) are deferred for California income tax purposes until distribution, consistent with IRC §530A.
  • Employer contributions — qualifying employer contributions of up to $2,500 per year are excluded from California wages, consistent with the federal exclusion under IRC §128.
  • Qualified governmental and charitable contributions — contributions from states, tribal governments, and IRC §501(c)(3) organizations that meet the defined-beneficiary-class requirement are excluded from the California gross income of the account beneficiary, consistent with IRC §139J.

State income tax treatment varies by state depending on each state’s conformity to the OBBBA amendments. Clients residing outside California should consult a state-specific advisor.

 Coordination with Other Retirement and Savings Accounts

Contributions to a Trump Account do not reduce the contribution limits for other retirement plans, including:

  • Traditional IRAs
  • Roth IRAs
  • 401(k) plans

For example, a working teenager under age 18 may fully fund a Roth IRA using earned income while also receiving up to $5,000 of annual contributions to a Trump Account.

 Trump Account vs. 529 Plan

A Trump Account is not intended to replace a 529 education savings plan.

A 529 plan generally provides tax-free investment growth and tax-free withdrawals for qualified education expenses. By comparison, a Trump Account provides tax-deferred growth, with earnings generally taxed as ordinary income upon withdrawal.

A Trump Account may provide additional value by offering:

  • A $1,000 federal seed contribution for eligible newborns;
  • Greater flexibility for future financial goals, including retirement, first-time home purchases, and other qualified uses; and
  • Employer-funded contributions as a potentially valuable tax-free employee benefit.

For most families, we recommend maintaining a 529 plan as the primary education savings vehicle while using a Trump Account to capture the federal seed contribution and any available employer contributions.

Recommended Action Items

  1.  Newborns 2025–2028: File Form 4547 with your 2025 federal income tax return, or submit through the IRS Online Account portal, to establish the account and claim the §6434 $1,000 seed contribution.
  2. Business owners: Evaluate a §128 Trump Account Contribution Program (TACP) offering up to $2,500 per employee per year as a tax-favored fringe benefit. A §128 employer program must satisfy nondiscrimination requirements modeled on those applicable to §129 dependent care assistance programs — highly compensated employees cannot be favored.
  3. Continue funding 529 plans: A Trump Account supplements rather than replaces a 529 plan.
  4. Fund by year-end: Trump Account contributions for 2026 must be made by December 31, 2026 — the IRA contribution deadline rule does not apply.

 

WE’RE HERE TO HELP…

Have questions about whether a Trump Account is appropriate for your family or business, or need assistance with the filing requirements? The experienced team at PP&Co is here to help. Contact us at (408) 287-7911 or via email at info@ppandco.com to discuss how this new program may fit into your overall tax and financial planning strategy.