New Trump Accounts Will Soon Expand Saving Options
By Mike Rahn, CISP
Independence Day 2026 will be most recognized as the 250th anniversary of the birth of our nation. But it will also be the day on which the newest tax-advantaged savings account will “go live.” July 4, 2026, is the first day on which one can contribute to Trump Accounts. Created by the One Big Beautiful Bill Act (OBBBA) legislation in 2025, Trump Accounts are intended to jump-start savings for young people under age 18.
Trump Accounts resemble IRAs in important ways. They also differ significantly from IRAs, both in how they are initially set up and funded, who may contribute to them, and how they may become a lifelong financial resource.
Treasury Department will be Launch Point
In a significant departure from IRAs, Trump Accounts must initially be opened through the U.S. Treasury Department and its designated custodial partners—rather than with a neighborhood bank, credit union, brokerage, or mutual fund company of one’s own choosing. (Treasury’s private sector partnership is expected to be announced soon.) Once established with the Treasury Department, a Trump Account can be moved to another qualified custodial entity through a qualified rollover contribution. However, ongoing investment restrictions and anticipated custodial responsibilities may limit the participation of many banking and nonbank entities that offer IRAs. Time will tell.
Who Can Have a Trump Account?
An authorized individual (e.g., a parent or guardian) may establish a Trump Account for any child who
has not reached the calendar year in which they will turn age 18,
has a Social Security number, and
does not already have a Trump Account (each child may have only one account).
The account will be established by filing new IRS Form 4547, Trump Account Election(s), or online at www.trumpaccounts.gov.
Contributions to Trump Accounts
Aggregate annual contributions are limited to $5,000 (indexed), and—unlike Traditional IRA contributions—are not deductible, but any earnings will grow tax-deferred. A contributor need not be a parent, guardian, or relative of the recipient—known as the account beneficiary—and earned income is not required of the contributor or the account beneficiary.
Employers may contribute up to $2,500 on behalf of their employees or their employees’ dependents under a Section 128 Trump Account contribution program. Such amounts are included in the annual $5,000 limit. Salary-reduction contributions can also be made through an employer’s Section 125 “cafeteria” plan to the Trump Account of an employee’s dependent, but not to the employee’s own Trump Account. More guidance on these contributions is anticipated.
In addition, a Qualified General Contribution can be made by a nonprofit charitable or governmental entity to a defined group, or class, of eligible recipients. Such contributions will be divided equally among the members of the identified class. For example, the Michael and Susan Dell Foundation has pledged more than $6 billion to be divided into $250 contributions to the accounts of children living in zip code areas with median annual household incomes below $150,000. Such contributions do not reduce the $5,000 annual contribution limit.
Unlike IRAs, contributions for a tax year must be made within that tax year. There are no “carryback” contributions, made during the January – April tax filing season.
Pilot Program Participants Get a Government Contribution
In addition to annual Trump Account contributions, OBBBA created a pilot program under which the Treasury Department will make a $1,000 initial contribution. Eligible children are those born between January 1, 2025, and December 31, 2028, who are U.S. citizens, have a Social Security number, and on whose behalf a pilot program election is made. This $1,000 Treasury contribution does not count toward the $5,000 annual contribution limit.
Concurrent Contributions to an IRA
A Trump Account beneficiary may contribute to a Traditional or Roth IRA for the same year that Trump Account contributions are made on his or her behalf, as long as Traditional or Roth IRA contribution rules are otherwise satisfied. Such contributions to a Traditional or Roth IRA do not offset or reduce contributions that can be made to a Trump Account on that individual’s behalf.
The Growth Period
The growth period starts the on the date that the Trump Account is established and ends before January 1 of the calendar year in which the account beneficiary turns 18. For example, a child born on October 1, 2025, will turn 18 on October 1, 2043: the growth period will end on December 31, 2042.
Investment Restrictions
Perhaps because Trump Account investments are generally expected to have a long-time horizon, permissible investments are slanted toward equity securities. During the growth period, Trump Accounts must be invested in an "eligible investment” that must be a mutual fund or exchange traded fund that tracks the returns of a qualified index, such as the S&P 500, or any other index made up primarily of U.S. company stocks with regulated futures contracts traded on a qualified exchange.
While indexes based on market capitalization (such as large-cap or mid-cap) are allowed, industry and sector-specific indexes—tech company stocks, for instance—are not permitted. Investment in money market or other cash-equivalent investments is only permitted during brief investment transition periods. Furthermore, an eligible investment fund’s annual fees and expenses must not exceed 0.1 percent of the balance of the investment in the fund.
Distribution Restrictions
Unlike IRAs, which permit distributions at any time, distributions from a Trump Account are generally prohibited until the calendar year in which the child turns age 18, unless a specific exception applies. Exceptions include distributions following the account beneficiary’s death, distributions to execute a qualified rollover contribution to another Trump account, to make a qualified ABLE account rollover contribution (allowed only during the calendar year in which the account beneficiary turns age 17), or to correct an excess contribution.
Starting January 1 of the year in which the account beneficiary turns 18, distributions are allowed under the same rules that apply to Traditional IRAs. Unlike qualified retirement plans, distributions for reasons of financial hardship are not permitted during the growth period.
From Trump Account to Traditional IRA
Although IRA rules generally will apply starting in the calendar year in which the Trump Account beneficiary turns 18 (after the growth period ends), the account will remain a Trump Account until transferred to a Traditional IRA. This can be a voluntary step taken after the growth period ends. In addition, the “written governing instrument” for the Trump Account can provide for an automatic transfer to a Traditional IRA at the end of the growth period.
Taxation Upon Distribution
Similar to nondeductible Traditional IRA contributions, nondeductible Trump Account contributions made by individuals create basis in the account, as well as tax-deferred earnings. Employer contributions, pilot program contributions, and contributions made by nonprofits or government entities do not create basis. Taxation of future Trump Account distributions will be adjusted under standard basis recovery rules to take into account the nondeductible nature of regular annual contributions.
Importantly, basis in a Trump Account is not considered in basis recovery calculations for distributions taken from Traditional IRAs. For basis-recovery purposes, Trump accounts are not aggregated with other IRAs. Basis in a Trump Account is taken into account only for distributions from that Trump Account and is disregarded for distributions from non-Trump IRAs. If Trump Account assets are transferred to a Traditional IRA after the growth period, any associated basis becomes Traditional IRA basis and is then subject to the standard IRA aggregation rules.
Trump Account Reporting
As with IRAs, custodial organizations will have reporting responsibilities for Trump Accounts. During the growth period, trustees must annually report contributions, distributions, the fair market value of the account, and the basis in the account. The source of the contribution, and whether it’s a pilot program, qualified general, qualified rollover, employer, or other type of contribution must be included in the annual report. Separately, when a qualified rollover takes place, the receiving trustee has 30 days to report to Treasury receipt of the rollover and the transferring trustee must promptly provide the receiving trustee with confirmation that the transferred account is a Trump account, along with basis and contribution-year information.
Once the growth period ends, standard IRA reporting rules apply to the account.
Conclusion
Only time will tell whether Trump Accounts will be enthusiastically received as an option by which to save for the financial well-being of the next generation. Procedures for account opening, rather narrow investment requirements, and lack of access to assets until the account beneficiary reaches age 18, may—or may not—temper initial enthusiasm. At the risk of being repetitious, time will tell.
