The BasicsÌý
- The OBBBA establishes Trump Accounts, which include a $1,000 federal seed contribution for newborns and aÌý$6.25 billionÌýgift from the Dell Foundation that provides $250 seed deposits for millions of eligible children.Ìý
- The legislation allows up to $5,000 in total annual contributions per child, which may include up to $2,500 from an employer on a tax‑free basis.Ìý
- LaunchingÌýJuly 5,Ìý2026, these tax-deferred accounts allowÌýpenaltyÌýfreeÌýwithdrawals beginning at age 18 for major milestones such asÌýpurchasingÌýa first home or pursuing higher education.Ìý
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Leveraging Trump Accounts: A Primer forÌýParentsÌýandÌýEmployersÌýÌý
As the One Big Beautiful Bill (OBBB) continues to reshape the American tax landscape, one of its most talked-about innovations is the introduction of Trump Accounts. Designed to jumpstart financial security for the next generation, these tax-advantaged accounts offer a unique way for families and employers to build long-term wealth for children.Ìý
WhetherÌýyou’reÌýa parent looking to secure your child’s future or an employer looking to enhance your benefits package, understanding the mechanics of these new accounts is essential for your 2026 tax planning.Ìý
What is a Trump Account?Ìý
AÌýTrump Account is a custodial-style savings vehicle designed specifically for U.S. citizens under the age of 18. While these accountsÌýshare some characteristics with traditional IRAs, they are uniquely structured to allow for multiple funding streamsÌý—Ìýincluding a first-of-its-kind government “seed” contribution,ÌýtheÌýinitialÌýdepositÌýthe government will provideÌýto jumpstart the account.ÌýThisÌýfoundational amount is intended toÌýencourage account holders and their families to buildÌýadditionalÌýsavings over time.ÌýÌý
The primary goal is toÌýleverageÌýthe power of compound growth fromÌýa very earlyÌýage, providing a financial foundation that can eventually be used for home purchases, education, or retirement.ÌýÌý
Who Is Eligible for a Trump Account?Ìý
Any U.S. citizen under age 18 can have a Trump Account opened on their behalf. However, specific eligibility criteria apply toÌýreceiveÌýthe governmentÌýorÌýphilanthropic seed contribution.ÌýEligibleÌýchildren receive one or the other; not both.ÌýChildren whoÌýdon’tÌýqualify forÌýeitherÌýseed contribution can still open Trump Accounts and benefit from tax-deferred growth on family and employerÌýcontributions.Ìý
Eligibility for theÌýFederal $1,000 Seed Contribution:Ìý
- Available to children born between Jan. 1, 2025, and Dec. 31, 2028
- One-time contribution deposited at account openingÌý
Eligibility for theÌýDell Foundation $250 Contribution:Ìý
- Available toÌý25 million childrenÌýage 10 and underÌý
- Must live in ZIP codes with median household incomes below $150,000Ìý
- Cannot be combined with the federal $1,000 seed (children receive one or the other;Ìýnot both)Ìý
Trump Accounts:ÌýKey Features and Benefits
The Trump Account structure offers severalÌýadvantagesÌýthat distinguish it from existing tools like 529 plans or standard custodial accounts.ÌýTheÌýkey differentiators include:Ìý
1. Government and Philanthropic Seeding:Ìý
TheÌýone-time $1,000 contributionÌýfrom the U.S. TreasuryÌýfor eligible newbornsÌýand theÌý$250 contributionÌýfrom the Dell FoundationÌýforÌý25 million childrenÌýin qualifyingÌýZIP codesÌýprovide aÌýfoundationalÌýinvestment for thoseÌýwho qualify.Ìý
Ìý2. No Earned Income Requirement:Ìý
Unlike a Roth IRA, a child doesÌýnot need to have a job to receive contributions.Ìý
3. Flexible Funding Sources:Ìý
Contributions can come from parents, grandparents, friends, and even employers.
4. Tax-Deferred Growth:Ìý
Investments within the account grow tax-deferred, meaning no taxes are due on capital gains or dividendsÌýuntilÌýfunds are withdrawn.Ìý
HowÌýmuchÌýcanÌýparents andÌýemployersÌýcontribute to a Trump Account?Ìý
ToÌýmaintainÌýthe tax-advantaged status of a Trump Account, several rules apply during theÌýgrowthÌýperiodÌý(from birth until age 18):Ìý
- Annual Limit:ÌýTotal annual contributions from all individual sources are capped at $5,000 per child (indexed for inflation after 2027).Ìý
- EmployerÌýLimit:ÌýEmployers can contribute up to $2,500 per year to an employee’s child’s Trump Account.ÌýThese contributions are excluded from the employee’s gross income, creating a valuable fringe benefit, and count toward the overall annual account contribution limit.
- Investment Restrictions:ÌýFunds must be invested in low-cost index funds or ETFs that track U.S. equity markets (with fees capped at 0.10%), ensuring broad-market exposure.Ìý
WhenÌýcanÌýfunds beÌýwithdrawnÌýfrom a Trump Account?Ìý
No distributions are allowed during theÌýgrowthÌýperiodÌý(birth to age 18), except in cases of death or disability. ThisÌýrestrictionÌýensuresÌýthe funds, which are intended for the account holder’s retirement,Ìýreach their long-term potential.Ìý
At age 18, the account becomes subject to standard Traditional IRA rules. Original after‑tax contributions can be withdrawn tax‑free; investment earnings and government/philanthropic contributions are taxed as ordinary income when withdrawn.Ìý
Funds can be used earlier for “American Dream” milestones, such as higher education or a first-home purchase, without the standard 10% early-withdrawal penalty.Ìý
How to Open a Trump AccountÌý
The process for opening these accounts begins with a tax election:Ìý
- Form 4547:ÌýParents or guardians must fileÌýIRS Form 4547ÌýtoÌýestablishÌýthe account and claim the $1,000 seed (if eligible).ÌýParents or guardians may file IRS Form 4547 eitherÌý
- with their 2025 tax return, orÌý
- electronically at TrumpAccounts.govÌý
- Timeline:ÌýWhile elections are happening now, accounts will officially be funded and accept privateÌýcontributions starting JulyÌý5,Ìý2026.Ìý
Your TakeawayÌý
Trump AccountsÌýrepresentÌýa significant shift in generational wealth-building. By combining government and philanthropic seeding with tax-deferred growth, they offer a robust vehicle for every American child toÌýparticipateÌýin the growth of the U.S. economy.Ìý
ÐÜèÊÓƵ’s Private Client Advisory and Tax teams are currently helping families and businessÌýownersÌýmodel how these accounts fit into their broader strategies. ToÌýdetermineÌýthe best way toÌýleverageÌýthis new tool for your family or your workforce,ÌýclickÌýhereÌýto speak with an advisor.Ìý
Frequently Asked QuestionsÌý
Q: Can a child have both a 529 plan and a Trump Account?ÌýA: Yes. Trump Accounts complement existing tools. WhileÌý529sÌýare focused on education, Trump Accounts provide a broader financial foundation that can follow the child into adulthood and retirement.Ìý
Q: What happens to the Dell contribution if we live in a high-income area?ÌýA: The Dell seed is targeted specifically at ZIP codes with a median income below $150,000. However, the child is still eligible for the account itself and any family/employer contributions, even if theyÌýdon’tÌýqualify for the Dell or Treasury seed.Ìý
Q: Are contributions tax-deductible?ÌýA: Individual contributions are made with after-tax dollars (not deductible). However, employer contributions are deductible for the business and tax-free for the employee.