If you have young children or employ people who do, there’s a new savings tool coming your way. The IRS recently released guidance (IR-2025-117 and Notice 2025-68, both issued December 2, 2025) that clarifies how Trump Accounts will work when they launch in 2026. These are tax-advantaged retirement accounts specifically designed for children under 18. While there’s still a lot to be determined, here’s what we know so far and what it might mean for your family or your business.
What is a Trump Account?
A Trump Account is a new type of tax-advantaged individual retirement account (IRA) designed specifically for children under age 18, created by the One Big Beautiful Bill Act (OBBBA) and now governed by Section 530A of the Internal Revenue Code.
At its core, a Trump Account is intended to help families begin long-term investing for a child well before adulthood. Unlike traditional or Roth IRAs, Trump Accounts do not require the child to have earned income. Instead, parents and other permitted contributors may fund the account on the child’s behalf.
The IRS has confirmed that contributions cannot begin until July 4, 2026, and many administrative details are still being finalized. This is important to understand: while the framework is now clear, some operational questions remain unanswered.
Who is eligible?
A Trump Account may be established for an individual with a social security number who has not turned 18 before the end of the calendar year in which the election to open the account is made. The election is expected to be made by a parent, legal guardian, adult sibling, or grandparent using Form 4547, which the IRS has released in draft form but has not yet finalized.
Although the IRS has not yet published full custodial rules, Trump Accounts are expected to operate similarly to custodial IRAs, with an adult acting as trustee or custodian until the child is legally permitted to control the account.
How do Trump Accounts work?
Contributions
Under current guidance, total contributions to a Trump Account are generally capped at $5,000 per year, aggregated across all sources. This limit applies regardless of whether contributions come from parents, relatives, employers, or other eligible contributors. Exceptions to the $5,000 cap include the $1,000 pilot program contribution (discussed below) and qualified general contributions from governments or charities, such as the recent $6.25 billion pledge from Michael and Susan Dell. Beginning after 2027, this annual limit will be indexed for inflation.
For business owners, there’s an important employer component: employers may contribute up to $2,500 per year to a Trump Account for an employee’s child through an employer Trump Account contribution program. These contributions are excluded from the employee’s taxable income, but they do count toward the $5,000 annual limit. Employers can also offer contributions to a dependent’s Trump Account through a salary reduction arrangement under a Section 125 cafeteria plan, which would allow employees to redirect salary on a pre-tax basis into the account.
If you’re a business owner considering whether to offer Trump Account contributions as an employee benefit, this is something we can help you evaluate. The tax advantages for both employer and employee may be attractive, but implementation requires careful planning around payroll systems and compliance.
Certain governmental entities and charitable organizations may also make contributions to Trump Accounts for a qualified group of beneficiaries, such as children in foster care or other defined populations.
Investments
Funds held in a Trump Account must be invested in broad-based U.S. equity index funds, such as mutual funds or exchange-traded funds that track the S&P 500 or another index primarily composed of American companies. Individual stocks, cryptocurrencies, and alternative investments are not permitted under current rules.
This is a significant restriction compared to other retirement accounts and limits the investment flexibility families might want for long-term growth strategies.
Withdrawals and tax treatment
Trump Accounts are subject to strict withdrawal limitations. No distributions may be taken before January 1 of the year in which the child turns 18, except for limited circumstances that have not yet been fully defined by the IRS.
After the child reaches that threshold, the account is generally treated as a traditional IRA. Withdrawals are taxed as ordinary income, and early withdrawal penalties may apply if funds are accessed before age 59 1/2, unless a qualifying exception applies. IRA basis rules also apply, which only tax the earnings and pre-tax contributions portion of withdrawals.
This tax treatment is critical to understand: unlike a Roth IRA where qualified distributions are tax-free, Trump Account withdrawals will create taxable income. This may be fine for long-term retirement planning, but it’s a disadvantage compared to Roth accounts if the child will need funds earlier in adulthood.
$1,000 pilot program contribution
Separate from regular contributions, the federal government will make a one-time $1,000 pilot contribution to certain Trump Accounts. This feature has received much attention, but it applies only to a limited group of children.
To qualify, the child must be:
- A U.S. citizen, and
- Born between January 1, 2025, and December 31, 2028, and
- Properly enrolled through a timely Trump Account election completed by the qualifying child’s parent or legal guardian.
This $1,000 contribution does not count toward the annual $5,000 contribution limit. However, children born outside the 2025-2028 window will not receive this federal deposit unless Congress extends or modifies the program in the future.
How Trump Accounts compare to other common options
Many parents are already familiar with Roth IRAs, custodial Roth IRAs, and 529 plans, and may wonder how Trump Accounts fit alongside or compete with those tools. Here’s how they stack up:
| Feature | Trump Account (as of Dec. 2025) | Custodial Roth IRA | Roth IRA | 529 Plan |
|---|---|---|---|---|
| Eligible Owner | Child under 18 with social security number | Minor with earned income | Adult with earned income | Anyone (beneficiary designated) |
| Earned Income Required | No | Yes | Yes | No |
| Annual Contribution Limit | $5,000 | $7,000 (2025) | $7,000 (2025) | High lifetime limits (state-specific) |
| Tax Treatment | Tax-deferred (traditional IRA rules) | Tax-free growth if qualified | Tax-free growth if qualified | Tax-free for education |
| Investment Restrictions | U.S. equity index funds only | Broad | Broad | Plan-dependent |
| Withdrawals Before 18 | Generally prohibited | Contributions can be withdrawn | N/A | Allowed for education |
| Federal Seed Money | $1,000 (limited pilot) | None | None | None |
This comparison highlights a key point: Trump Accounts are designed for long-term retirement-style savings, not education funding or short-term flexibility. For many families, they may complement rather than replace existing college savings or other investment strategies.
What we don’t know yet
Although the December 2025 guidance answers many foundational questions, important uncertainties remain. The IRS has not yet finalized rules addressing:
- Whether funds can be rolled into Trump Accounts from 529 plans or other custodial accounts
- How Trump Accounts will be treated for state income tax purposes
- Detailed trustee and custodial requirements
The IRS has explicitly requested public comments on several of these issues, signaling that additional guidance is expected in 2026. We’re monitoring these developments closely and will keep clients informed as clarity emerges.
What should you do now?
Even though contributions cannot begin until July 2026, there are practical steps you can take now:
Familiarize yourself with the rules. Understanding how Trump Accounts work and how they differ from other savings vehicles will help you make informed decisions when the accounts become available.
Track eligibility for the $1,000 pilot program. If you have children born between 2025 and 2028, make note of the enrollment requirements to ensure you don’t miss the opportunity for the federal contribution.
Evaluate whether Trump Accounts fit your planning strategy. This requires looking at your overall financial picture: college funding needs, retirement planning, existing savings vehicles, and family circumstances. We can help you think through how Trump Accounts might complement your existing strategies or whether other approaches make more sense for your situation.
For business owners: Consider the employee benefit implications. If you’re thinking about offering Trump Account contributions as part of your benefits package, now is the time to start planning for payroll system adjustments and understanding how the program would work administratively.
Parents who already use 529 plans or custodial Roth IRAs should be especially cautious about assuming Trump Accounts are a replacement. At least for now, they appear to serve a distinct and more restrictive purpose.
A new tool, still taking shape
Trump Accounts are still very much a work in progress. The IRS’s December 2, 2025, notice provides clarity on structure and intent, while also making clear that important questions remain unresolved.
For families trying to make sense of these accounts, the key takeaway is this: Trump Accounts are real, they are coming, and they may be useful–but the full picture will not be clear until additional IRS guidance is released.
At RMG, we’re staying on top of these developments and will continue to monitor guidance as it evolves. If you have questions about how Trump Accounts might fit into your family’s financial planning or whether offering them as an employee benefit makes sense for your business, we’re here to help you think through the implications and make informed decisions.
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*The materials provided in the Insights section are for general informational purposes only and may not reflect the most current legal, tax, or financial developments. While we strive to ensure accuracy at the time of publication, RMG CPA LLC does not guarantee that the information remains up-to-date or free from error. We recommend consulting directly with a RMG CPA LLC team member to confirm the applicability and relevance of any information to your specific situation.