In December 2025, the IRS released Notice 2025-68, announcing proposed regulations for a new type of tax-advantaged account known as a Trump Account. These accounts were created under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, and are designed to provide long-term savings opportunities for children beginning at birth.

While Trump Accounts resemble traditional IRAs in structure, they come with unique rules, contribution sources, and restrictions, particularly during the beneficiary’s childhood. Below is a practical overview of how Trump Accounts work, who qualifies, and why families and employers should pay attention.

 

What Is a Trump Account?

A Trump Account is a special type of traditional IRA established exclusively for an eligible individual under age 18. The account must be designated as a Trump Account at inception and is owned by the child beneficiary, not the parent.

Trump Accounts are governed by a special set of rules during what the IRS refers to as the “growth period”—the time from account establishment through December 31 of the year before the beneficiary turns 18. After the growth period ends, most of the special rules fall away and the account largely follows traditional IRA rules under Internal Revenue Code §408.

 

Who Is Eligible?

An individual qualifies for a Trump Account if all of the following are true:

• The individual has not reached age 18 by the end of the election year
• The individual has a Social Security number issued before the election date
• A valid election is made to establish the account on Form 4547

Notably, the IRS—not the family—will initially establish the Trump Account for eligible individuals.

 

The $1,000 IRS Pilot Program Contribution

One of the most talked-about features of Trump Accounts is the IRS-funded pilot program under IRC §6434.

Under this program:

• The IRS contributes $1,000 to a Trump Account
• The child must be born after December 31, 2024 and before January 1, 2029
• The child must be a U.S. citizen and a qualifying child under IRC §152(c)
• Only one pilot contribution is allowed per child

This $1,000 contribution is protected from offsets, is not taxable to the child, and does not create tax basis in the account. Improper elections, however, can trigger IRS penalties.

 

Contribution Rules During the Growth Period

Trump Accounts allow multiple contribution sources, which is a major departure from traditional IRAs.

 

Permitted Contribution Types

During the growth period, contributions may come from:

1. IRS pilot program contributions ($1,000)
2. Qualified general contributions from governments or 501(c)(3) organizations
3. Employer contributions under IRC §128
4. Qualified rollovers from another Trump Account
5. Private contributions from parents, relatives, or others

Unlike IRAs, earned income is not required for contributions during childhood.

Contribution Limits

• IRS pilot contributions, government contributions, and rollovers are not subject to annual limits
• Employer and private contributions are capped at $5,000 per year, indexed for inflation after 2027
• Employer contributions under §128 are further capped at $2,500 per year

Contributions from parents or others are non-deductible and create tax basis in the account, while government and employer contributions generally do not.

 

Investment Restrictions

During the growth period, Trump Accounts are subject to strict investment limitations.

Permitted investments must:

• Be U.S.-based mutual funds or ETFs
• Track a broad U.S. stock index (e.g., S&P 500)
• Use no leverage
• Have annual fees of 0.10% or less

These restrictions are designed to keep costs low and limit investment risk during childhood.

 

Distribution Rules

Trump Accounts are largely locked down during childhood.

 

During the Growth Period

Distributions are prohibited except for:

• Trustee-to-trustee rollovers
• ABLE account rollovers
• Excess contribution corrections
• Distributions upon death of the beneficiary

After Age 18

Once the growth period ends, distributions generally follow traditional IRA rules, including:

• Ordinary income taxation
• 10% early withdrawal penalty under IRC §72(t)
• Standard exceptions for education expenses, first-time home purchases, or age 59½ withdrawals may apply to avoid to 10% early withdrawal penalty

 

Reporting and Compliance

Trump Accounts have unique reporting requirements during the growth period.

• Trustees report under IRC §530A(i) instead of standard IRA reporting rules
• Additional disclosures include contribution sources and account basis
• Penalties apply for failure to report unless reasonable cause exists

After the growth period ends, standard IRA reporting under IRC §408(i) applies.

 

Long-Term Planning Implications

Even after the beneficiary turns 18, a Trump Account remains permanently classified as a Trump Account. This creates two important limitations:

• It can never receive SEP or SIMPLE IRA contributions
• It can never be aggregated with other IRAs for basis calculations

These rules make early planning and account coordination critical.

 

Why Trump Accounts Matter

Trump Accounts represent a significant shift in how the federal government encourages long-term wealth building for children, blending elements of retirement accounts, education planning, and government incentives.

For families, employers, and advisors, the opportunity—and the complexity—lies in understanding:

• How contributions interact with other savings vehicles
• The long-term tax consequences once the child reaches adulthood
• The compliance and reporting responsibilities along the way

As proposed regulations evolve into final rules, professional guidance will be essential to ensure Trump Accounts are implemented correctly and aligned with broader financial and tax planning strategies.