You may have heard something in the news about a Trump Account (TA) and wondered what it’s all about. Established by the 2025 One Big Beautiful Bill Act (OBBBA), Trump Accounts are a type of individual retirement account (IRA) for beneficiaries who are under 18.
Who Qualifies?
An “eligible individual” is one who is under 18 on December 31 of the year the TA is opened and has a Social Security number valid for employment issued prior to the opening of the TA.
What is the Seed Money Pilot Program?
One provision of the OBBBA is $1,000 “seed money” to help establish the Trump Account. To be eligible, the individual must be a U.S. citizen and be born between January 1, 2025, and December 31, 2028. They also must have a valid Social Security number issued to them before the TA is opened.
Who Can Open a TA on Behalf of a Child?
“Authorized Individuals” who can open an account are as follows in this order:
- Legal guardian
- Parent
- Adult Sibling
- Grandparent
The authorized individual will remain responsible for the account unless it is rolled over to another TA or the individual names a successor. To qualify for the $1,000 Seed Money, the child must be a qualifying child of the authorized individual for tax purposes.
How Much Can Be Contributed to a TA?
Anyone can contribute on a beneficiary’s behalf as a Direct Contribution. The maximum is $5,000 per year (indexed for inflation after 2027) and must be made by December 31 of the contribution tax year. It is not tax deductible by the giver.
Employer contributions also are permitted, with a maximum of $2,500 per employee. The contribution is not taxed to the beneficiary or employee in the year given but is taxed when distributed. Employer contributions count toward the $5,000 Direct Contribution limit.
Qualified General Contributions are made by charitable organizations or government entities with no annual dollar limits. They do not count towards the limit for direct and employer contributions. The contribution is not taxed to the beneficiary or employee in the year given but is taxed when distributed. Additional restrictions apply for Qualified General Contributions.
What Happens When the Beneficiary Turns 18?
Beginning on January 1 of the calendar year in which the beneficiary turns 18, the special TA rules no longer apply; the rules governing traditional IRAs generally apply. The beneficiary becomes the “owner” of the account and has four basic options:
- Take distributions from the account (may be subject to early distribution penalties)
- Keep the TA open and invested (generally follows the same rules as traditional IRAs)
- Rollover the TA to a traditional IRA
- Convert the TA to a Roth IRA
With the principle of compound interest, a Trump Account could grow into a substantial retirement nest egg for the beneficiary’s future.
How Do I Open a TA for a Child?
File Form 4547 with the IRS. You may file it with a current tax year return, complete it “stand alone” and file online with an IRS account, or complete it “stand alone” and mail it to the address for your tax return for the year for which you are making the election.
What Should I Consider Before Opening or Contributing to a TA?
- Does the beneficiary qualify for the $1,000 seed money, employer contributions, or qualified general contributions? This is free money!
- What other financial goals does the family have for this child?
- What would be the purpose of this money?
For more information, visit https://www.irs.gov/trumpaccounts or https://www.trumpaccounts.gov.
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