IRS Issues Guidance on Trump Accounts
The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, established Trump Accounts and the Trump Account Pilot Program. The IRS recently released interim guidance on definitions related to Trump Accounts, election rules to open an initial Trump Account, and rules for the accounts’ responsible parties.
What is a Trump Account?
A Trump Account is a new individual retirement account for eligible children. These accounts are subject to special rules that don’t apply to other individual retirement accounts during its growth period (the growth period being between the time the account is established and December 31 of the year the Trump Account beneficiary reaches age 17). The accounts offer a tax advantaged savings vehicle for children, with the following benefits:
- All contributions are tax-free
- All investment gains are taxed as ordinary income when withdrawn after age 18
- $5,000 annual contribution limits
- Up to $2,500 in contributions allowable by employers
The Trump Account Pilot Program provides for a one-time $1,000 contribution to the Trump Account of an eligible child. The program also allows for employers to make contributions to the account for an employee or employee’s dependent.
What are the requirements to open a Trump Account?
A Trump Account can either be an initial Trump Account, organized by the Treasury Secretary for an eligible child, or a rollover Trump Account, which is created during the growth period and funded by a rollover contribution from the beneficiary’s existing Trump account. Any individual may only have one type of account at a time. An authorized individual can use Form 5457 to elect to open an initial Trump Account; the form also provides the opportunity to request the $1,000 contribution from the Treasury Secretary for the eligible child.
A child is considered eligible for the $1,000 contribution to their Trump Account if:
- They are born in calendar year 2025, 2026, 2027, or 2028;
- They are a United States citizen;
- They have been issued a Social Security number; and
- They are someone for whom no prior pilot program election has been made and processed.
The election to enter the pilot program can be made any day from when the child becomes eligible until December 31 of the year in which they turn 17. Additionally, only the first pilot program contribution election processed, by the IRS, will generate a $1,000 contribution into the child’s Trump Account.
The contribution limit for each year is $5,000, generally. After 2027, the contribution limit can be adjusted for inflation. Contributions that are exempt from the limit include qualified rollover contributions, qualified general contributions, and contributions provided under the pilot program.
Contact Us
These program regulations are proposed to begin or on after January 1, 2026.If you have questions or need assistance with another tax or accounting issue, Klatzkin can help. For additional information call 609-809-9189 or click here to contact us. We look forward to speaking with you soon.