Included in the One Big Beautiful Bill (OBBB) signed into law July 4, 2025 was the creation of a tax-advantaged savings account for children called “Trump accounts”. A Trump account is treated like an IRA with the following stipulations:
- Must be created for the exclusive benefit of an individual who has not reached age 18 by the end of the year.
- Must be designated as a Trump account at the time it is established.
- No contributions will be accepted before July 4, 2026.
- No distribution will be allowed before the year in which the beneficiary reaches age 18.
- Contributions are limited to $5,000 per year, adjusted annually for inflation after 2027.
- Employers can contribute up to $2,500 annually (adjusted annually for inflation after 2027) to a Trump account of an employee or an employee’s dependents that will be excludible from the employee’s gross income.
- A one-time payment of $1,000 will be made by the Treasury to a Trump account for a child born during the period January 1, 2025 – December 31, 2028 if an election is made on the parents Form 1040 for the year of birth. This is referred to as a “Pilot Program Contribution”.
- To open a Trump account for an eligible dependent child, new Form 4547 can be e-filed with Form 1040. Form 4547 can also be paper filed if so desired.
The IRS has announced that once the Treasury Department verifies that a Trump account was opened, the $1,000 of “seed money” for children born in 2025 will hit the accounts sometime after July 4, 2026. Michael and Susan Dell announced in December that they will personally be donating $6.25 billion to fund Trump accounts – $250 for 25 million children under age 11 in lower-income areas with median family income of $150,000 or less. Various large companies including Bank of America, Charles Schwab, Comcast, IBM, JPMorgan Chase and Wells Fargo have announced they will match the $1,000 contribution for the children of their employees.
Additional information can be found at www.trumpaccounts.gov.
