Trump Accounts Under OBBBA: What Families Should Know Before Contributing

The One Big Beautiful Bill Act (OBBBA) enacted on July 4, 2025, introduced several new measures, including increased caps for state and local tax deductions and new deductions for tips, overtime pay, and interest on certain auto loans. OBBBA also created Trump accounts, effective for taxable years beginning after December 31, 2025. Trump accounts are traditional IRA-type accounts for minors with special pre-18 contribution, investment, and distribution rules. Let’s break down what Trump accounts actually are.

Traditional IRA-Type Accounts for Minors

IRC §530A(a) provides that a Trump account is treated in the same manner as an individual retirement account (IRA) under IRC §408(a), except as otherwise provided in IRC §530A or in Treasury guidance. IRS Notice 2025-68 and subsequent proposed regulations provide initial guidance on how Trump accounts are established, funded, invested, and administered. Trump accounts are generally taxed like a traditional IRA, but they differ significantly from ordinary traditional IRAs by allowing contributions before the beneficiary turns 18.

Special Rules Before Age 18

Contributions

Trump account contributions can be made during the growth period, which begins when the initial Trump account is established and ends on December 31 of the year the beneficiary attains age 17. Contributions can be made by the child, parents, other individuals, the Treasury through qualified general contributions and its pilot program (discussed below), employers under IRC §128, or through a qualified rollover.

Unlike ordinary traditional IRA contributions, individual contributions to a Trump account during the growth period are not deductible. Contributions made by the Treasury (noted below) and rollover contributions are exempt from this limit. While employer contributions under IRC §128 are excluded from the employee’s gross income, employer contributions are limited to $2,500 per employee per calendar year (indexed after 2027).

The Treasury offers a separate one-time $1,000 pilot contribution for certain U.S. citizen children with an issued Social Security number born in 2025 through 2028. The contribution is only available once, so a child is not eligible if a prior pilot contribution election has already been made for that child. The $1,000 pilot contribution is not paid by the family. Instead, the authorized individual requests it on Form 4547, Trump Account Election(s), or through the online election process. Form 4547 instructions define who may act as the authorized individual, which generally may include a legal guardian, parent, adult sibling, or grandparent, in that order of priority, depending on the circumstances. The Treasury will make the contribution after the election is processed and the initial Trump account trustee confirms that the account has been opened. Importantly, not every child eligible to have a Trump account is eligible for the $1,000 pilot contribution. Trump account eligibility and setup are discussed below.

Investments

Before the beneficiary turns 18, account funds may be invested only in “eligible investments,” which include certain mutual funds or ETFs that track a qualified index (e.g., S&P 500), do not use leverage, have annual fees and expenses of no more than 0.1 percent, and satisfy any additional criteria the Treasury may prescribe.

Distributions

During the growth period, distributions are generally prohibited, except for qualified rollover contributions to another Trump account, qualified ABLE rollover contributions, distributions of excess contributions, and distributions triggered by the beneficiary’s death.

Interplay with Traditional IRAs

During the growth period, contributions are generally capped at $5,000 per year (indexed after 2027). That is a separate statutory cap from the ordinary IRA contribution limits ($7,500 for 2026; $8,600 for those 50 or older). In other words, Trump account contributions do not count toward ordinary IRA contribution limits.

After the growth period, Trump accounts generally will be subject to the same rules that apply to other traditional IRAs (e.g., rules related to contributions, distributions, required minimum distributions, rollovers, Roth conversions, ordinary income taxation, and reporting).

Interplay with SIMPLE IRAs and SEPs

Treasury guidance states that a Trump account can never receive contributions under SIMPLE IRA plans. A Trump account cannot serve as the SIMPLE IRA into which employee salary reduction contributions or employer matching/nonelective SIMPLE contributions are deposited. Similarly, a Trump account can never receive contributions under SEP plans. Trump account contributions do not count toward SIMPLE IRA and SEP contribution limits. Even after the growth period ends, the Trump account remains permanently ineligible to receive SIMPLE or SEP contributions.

How to Open a Trump Account

An initial Trump account for an eligible individual can be started by an authorized individual in 2026 by making an election on Form 4547 or by using the online portal. An eligible individual must be under age 18 at the end of the calendar year of election and must already have a Social Security number issued before the election is made. If the child is also eligible for the one-time $1,000 pilot contribution, that election can be made at the same time.

After the election to open a Trump account is made, the Treasury or its agent will send instructions to the authorized individual who made the election on how to activate the account.

Final Thoughts

Trump accounts add another option to the conversation surrounding retirement savings and economic policy. Supporters of Trump accounts see them as a new long-term savings and wealth building option for children at a young age. Critics, however, question if they will be readily accessible to the average American. We will continue to watch how Trump accounts evolve as it’s been almost a month since the first wave of contributions started.

For more information, or if you have thoughts and/or questions about the information outlined above, please do not hesitate to contact us; our seasoned and experienced tax professionals are always here to help. You can also learn more by visiting our Tax service page.

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