The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, has ushered in a new era of tax reform. One aspect of the OBBBA that has been in the headlines and on the minds of many American families recently is the new “Trump Accounts.” While accounts such as 529 plans and UGMA/UTMA remain important ways to save for a child’s future, the Trump Account serves a different purpose and deserves attention in a family’s financial plan. Trump Accounts are now operational, with contributions permitted beginning July 4, 2026. While the statutory framework is established, the Treasury Department and IRS continue to issue guidance and proposed regulations addressing certain implementation details, including employer contributions and eligible investments.
Below is an overview of how these accounts work and who benefits.
Eligibility & Availability
- General Eligibility: A Trump Account may be established for a child with a valid Social Security Number if the election is made before the calendar year in which the child turns 18.
- Pilot Program: U.S. citizens with a valid Social Security Number born between January 1, 2025 and December 31, 2028, are eligible for a one-time $1,000 federal contribution.
- Timeline: Enrollment is open, and Trump Accounts became eligible to receive contributions beginning July 4, 2026.
Contributions
- Federal Deposit: The U.S. Government provides a $1,000 pilot program deposit for eligible children.
- Private Contributions: Parents, grandparents, family members, friends, and others may contribute after-tax dollars. These contributions count toward the $5,000 annual contribution limit during the growth period, which is indexed for inflation after 2027.
- Employer Contributions: Limited to $2,500 annually per employee (pre-tax). If you have multiple children, that $2,500 total must be split between their accounts. These funds do count toward the child’s $5,000 annual limit.
- First-Year Total: For eligible children in 2026, the total can reach $6,000 ($1,000 federal seed + $5,000 private/employer funds).
- Exemptions: "Qualified General Contributions" from 501(c)(3) organizations or government entities (targeted by ZIP code or DOB) are exempt from the $5,000 annual limit.
- Tax Impact: Contributions do not offer a tax deduction and do not affect standard IRA contribution limits for the donor.
“Growth Phase” (Under Age 18)
- Tax Treatment: Investments grow tax-deferred.
- Approved Assets: During the "growth phase" (under age 18), funds generally must be invested in Treasury-approved, low-fee ETFs or mutual funds that track U.S. stock indexes.
- Accessibility: Funds are locked and cannot be accessed for any reason until the child reaches age 18.
Withdrawals (After Age 18)
- Account Transition: A Trump Account is a type of Traditional IRA with special rules during the beneficiary's growth period. After the growth period ends, most of the standard rules applicable to Traditional IRAs generally apply.
- Contribution Rules: Standard Traditional IRA limits apply. The beneficiary must have earned income to continue contributing up to the funding limits.
- Withdrawal Rules: Standard Traditional IRA rules kick in. Withdrawals before age 59½ are generally subject to a 10% penalty plus ordinary income tax.
- Exceptions: Penalty-free (but still taxable) withdrawals are permitted for qualified higher education, first-time home purchases (up to $10,000), and other standard IRA exceptions.
Enrollment Process
- Form 4547: An authorized individual can establish a child's initial Trump Account by making an election using IRS Form 4547.
- Pilot Program: For an eligible child born between 2025 and 2028, the authorized individual can also elect to receive the one-time $1,000 federal pilot program contribution.
- Online Portal: Enrollment is available at https://form.trumpaccounts.gov/.
Real-World Example
One of the first examples of a Qualified General Contribution comes from Michael and Susan Dell, who committed $6.25 billion to provide $250 contributions to the Trump Accounts of up to 25 million American children.
The contribution is targeted toward children born between 2016 and 2024 who have a valid Social Security Number and live in a qualifying ZIP code with a median family income of $150,000 or less. Because eligibility is based on the ZIP code rather than an individual family’s income, families may qualify regardless of their own household income.
This past week, we saw the Dell contribution reach the Trump Accounts of children in eligible ZIP codes here in Phoenix. This provides a real-world example of how Qualified General Contributions can benefit families beyond what they contribute to the accounts themselves. Families with children under 18 may want to consider establishing Trump Accounts so they are positioned to receive any Qualified General Contributions for which their children may become eligible in the future.
If you would like to discuss how this approach fits into your families financial plan, we are always happy to continue the conversation.