What Families Need to Know About Trump Accounts and the New IRS Rules

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Trump Accounts, the new tax-deferred accounts for children, were created by Public Law 119-21 (the “OBBBA”) and offer families $1,000 in government seed money per child for children born in calendar years 2025, 2026, 2027, or 2028. Children born outside of that window who cannot get the subsidy are still eligible to set up an account if they have not turned age 18 before the end of the calendar year in which an election is made to enroll in the program. The children must be U.S. citizens, have a social security number, and have no prior program election made for them.

The IRS released initial rules for Trump accounts late last year and now has followed up with two sets of proposed regulations that give more details on how to opt into the program. The first set of regulations explains how to open initial Trump accounts. The additional regulations provide details on the mechanism for the $1,000 government deposits into those accounts.

There is no income limit for eligibility, so taxpayers at all income levels can participate in the program. Contributions of up to $5,000 per year are allowed and can come from different sources, including tax-free employer contributions. Employers may deduct those contributions. Funds in Trump Accounts must be invested in mutual funds or exchange-traded funds that track the S&P 500 or another index of “primarily American equities.”

How to Make the Election

To enroll in the program, a parent or other authorized individual or a responsible party designated by the Treasury Department must file a Form 4547, Trump Account Election(s), at the same time as the 2025 tax return or on the special registration portal at trumpaccounts.gov. Note, however, that the initial election is not a part of any individual’s tax return and is considered independent of the filing of the income tax return. An authorized individual is, in order of priority, a legal guardian, parent, adult sibling, or grandparent of the eligible individual.

How to Get the $1,000 Pilot Program Deposit

The second set of regulations explain the procedures for getting the initial $1,000 deposited into the child’s account. Making an initial election for an eligible child starts the process for the one-time, $1,000 pilot program contribution into the child’s Trump account. When the election is filed, the eligible child is treated as making a $1,000 “overpayment” against the income tax liability for the taxable year for which the election is made. After authenticating the election and once the child’s account is activated, the Treasury Department “refunds” the $1,000 into the financial institution holding the child’s Trump account. Official funding begins on July 4, 2026.

Who Can Make Contributions

During the growth period (up until age 18), there are five types of contributions that can be made to a Trump account:

$1,000 initial government contribution for newborns
contributions from other sources such as the account beneficiary, parents, grandparents, or any other person
Up to $2,500 in employer contributions that are not included in the employee’s income
rollover contributions
general contributions from governmental organizations or charities for members of a qualified class of beneficiaries

Pilot program contributions, qualified general contributions, and rollover contributions are not subject to an annual contribution limit. Otherwise, there is a $5,000 annual contribution limit which will be indexed for inflation after 2027.

Withdrawal Restrictions

Funds cannot be withdrawn from Trump Accounts before January 1st of the calendar year in which the child turns 18 years old. No distributions are allowed during this growth period, including hardship distributions. The only distributions allowed before the child turns 18 are: 1) distributions that are qualified rollovers; 2) qualified ABLE rollover contributions; 3) distribution of excess contributions; or 4) a distribution upon the death of the account beneficiary.

After a child turns 18, the account is treated like a traditional IRA. Funds can be withdrawn without penalty for qualified expenses such as education, a first-home purchase, or starting a business. Withdrawals will be taxed at ordinary income rates. Nonqualified distributions incur early distribution penalties. Note that account holders should be able to convert these accounts to Roth IRAs, too, although the IRS has not released specific guidance on this issue thus far.

Conclusion

The regulations provide clarity to the 44 million families with children under age 18 who may be eligible to open an initial Trump account. The IRS has announced that over 4 million children have been signed up for the accounts so far, with 1 million claiming the $1,000 government subsidy. The time to act is now.

The rules for who is authorized to make the elections and the authentication process can be difficult to understand. Thus, it is important to consult with your Frazier & Deeter tax adviser to begin the Trump account election process for your eligible children.

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