Trump Accounts: Questions and Hurdles Before Launch July 4, 2026

Trump Accounts were passed into law as part of the One Big Beautiful Bill Act (OBBBA) of 2025 and are individual retirement investment-style accounts established for children under the age of 18. They are due to launch on July 4, 2026. However, many parents and financial professionals are waiting for some key details from the US Treasury Department as to how Trump Accounts will work, including who is eligible to contribute and the tax consequences of Trump Account fund contributions and distributions.

A Trump Account is a child-owned and parent administered investment vehicle, that functions similarly to a traditional IRA and designed to build long-term financial security for American youths. Key details about Trump Accounts are:

• A $1,000 “seed” federal government contribution. Eligible Children born between January 1, 2025 and December 31, 2025 qualify to receive a one-time $1,000 federal government contribution to their account.
• Contribution limits. Families, charities and employers can contribute up to $5,000 per year.
• Withdrawals. Funds are generally locked up until the child turns 18 at which time the account turns into a traditional IRA.
•Enrollment. Parents or legal guardians can open a Trump Account and claim the federal government contribution by visiting TrumpAccounts.gov or by filing IRS Form 4547. The official Trump Accounts app is also available at all major mobile app stores.

Before parents or legal guardians sign up for a Trump Account for their children, they are advised to be aware of the rules for contributions, federal and state income tax consequences with respect to contributions and withdrawals, and other issues that are still being addressed when it comes to opening up a Trump Account. In addition, parents and legal guardians should be aware that they may also need to “jump through a few hoops” in order to actually activate and contribute to their accounts.

Obstacles for Signing Up for Trump Accounts

For any individual who signed up for a Trump Account using IRS Form 4547 (“Trump Account Election(s)”) when they filed their 2025 federal income tax return earlier this year, things should go smoothly as they activate their account and make contributions starting July 4, 2026. They may do so on the Trump Accounts app (or the Web version of the Trump Accounts app at Trumpaccounts.com). But other individuals will likely have to take additional steps if they signed up for a Trump Account using a basic form that was available on the site Trumpaccounts.gov from February through late May 2026. A Treasury Department spokesperson said that these individuals will likely have to go through additional security verification, which includes creating an online IRS account if they do not have one and verifying their identities using ID.me.
Those individuals who have not yet opened up a Trump Account and want to can either download the Trump Accounts app or go to Trumpaccounts.gov and fill out IRS Form 4547. Either way, they will have to go through identity verification. Individuals should be aware that the other Web site affiliated with Trump accounts (Trumpaccounts.com) is not affiliated with the US Government.

Confusion As to Who Can Legally Open a Trump Account

According to many financial professionals including CPAs and tax attorneys, there remains confusion about Trump accounts with respect to:

(1) Who is eligible to open up a Trump Account on behalf of a child younger than age 18; and
(2) Who can elect to get the $1,000 federal government “seed” contribution on behalf of a child born between January 1, 2025 and December 31, 2028.

A grandparent can open a Trump account (and therefore contribute) on behalf of a grandchild in limited circumstances. A grandparent can open a Trump Account (and claim the $1,000 “seed” federal government contribution for a grandchild born before January 1,2025 only if the grandparent can claim the grandchild as a tax dependent.

For children born before January 1,2025, there is a hierarchy as to who can legally open a Trump Account. The hierarchy starts with parents, legal guardians, adult siblings or “anyone who is available.” It is not clear what is meant by “anyone who is available” , What does available mean? Does it mean that an individual higher up on the priority list for opening up a Trump Account (that is, a parent or a legal guardian) has to be deceased, incapacitated, or incarcerated in order for an individual lower on the priority list to open an account? What happens if a parent (highest on the priority list) is not available to open a Trump Account on behalf of their child? The American Institute of Certified Public Accountants (AICPA) has asked the IRS for clarity.

Trump Account Contributions / Distributions and Tax Consequences

The maximum contribution that can be made to a Trump Account is $5,000 per year. Multiple sources can contribute each year. Contribution limits apply across all sources with one exception. The federal government “seed” contribution amount of $1,000 and qualified general contributions from a charitable organization do not count toward the yearly $5,000 limit. These exceptions can make a major difference for eligible families. The following list offers the details of who can contribute to a Trump Account on behalf of a child under age 18:

1. Federal government “seed” pilot contribution. A one-time $1,000 contribution for newborn US citizen children does not count towards the annual Trump Account contribution limit. Children must be born between January 1,2025 and December 31, 2028. The $1,000 contribution plus any other qualified general contributions will be taxable when withdrawn.

2.Individual contributions. An adult can contribute up to a combined total of $5,000 per year per account, indexed for inflation starting January 1, 2028. Contributions are made on an after-tax basis. This means that individual Trump Accounts contributions will not be taxed when they are withdrawn.

3.Employer contributions and employee deferrals. A Trump Account can be funded by both an employer and/or through a before-tax payroll deduction option. As with other employee benefit elections, not every employer will offer this feature. An employer or employee must satisfy the following rules:
a. Employer-funded contributions. An employer can choose to contribute up to $2,500 per year per employee (indexed for inflation). Those employees who have multiple children may split the employer contribution among multiple children under age 18. Employer contributions are excluded from an employee’s income and are made on a pre-tax basis and will count toward the $5,000 annual contribution limit.
b. Employee salary reduction. Employees can elect to have a portion of their salary deducted on a before-tax basis (before federal and state income taxes are withheld) and count toward the child’s $5,000 contribution limit.
c. Employer/employee contributions are taxable when withdrawn. Both the employer and the employee contributions made towards a child’s Trump Account are fully taxable when withdrawn.

4. General funding contributions. States, local governments and 501(c)(3) charities may contribute. These contributions do not count towards the annual $5,000 contribution limit per account and are fully taxable when withdrawn.

5. Rollovers. A direct rollover over from a child’s Trump Account to another Trump Account is not taxable. Any “cost (tax) basis” based on the source contribution will carry over from the original Trump Account to the new Trump Account.

It is important for potential Trump Account investors to understand that contribution sources will determine how future taxes will apply to distributions. Investors are therefore advised to keep accurate records of contribution sources and amounts. Regardless of contribution sources, all Trump Account accrued earnings when distributed will be fully taxable.

Potential Trump Account investors are advised that Trump Accounts are designed for long-term savings. The means that withdrawals are highly restricted before the account owner (the child) becomes aged 18. Before the account owner becomes aged 18, account withdrawals are generally not allowed except for limited rollovers.

Trump Account Beneficiaries

When a Trump Account beneficiary (that is, the child who is the Trump Account owner) reaches age 18, the beneficiary has three options for the account. The three options are:

1. Keep the account as a Trump Account under general IRA rules. Although Trump Accounts follow many of the features of traditional IRAs, a Trump Account can remain a separate Trum Account. For example, Trump Accounts are not grouped with traditional IRA when determining how much of a withdrawal is taxable. When an individual owns multiple traditional IRAs, the IRS uses the “aggregation rule” to determine the taxable amount of a withdrawal.

2. Rollover the balance to a traditional IRA or in some cases, a workplace retirement plan.

3. Conversion to a Roth IRA. This may or may not be appropriate given the Trump Account beneficiary’s tax situation.
Trump Accounts that are left alone when a child becomes age 18 will potentially grow tax-deferred and be penalty-free of federal and state income taxes until the child becomes age 59.5. At that time, the child can make penalty-free withdrawals but must pay federal and state income tax on the taxable portion of the account.

Many employers are still waiting for IRS guidance on how they can structure an employee benefit program in order to help fund Trump Accounts. For now, parents’ contributions to Trump Accounts must be made with after-taxes dollars. In order to not pay income taxes on their Trump Account contributions when they are withdrawn sometime after the child becomes age 18, parents will need to keep track of the child’s “cost” basis in their Trump Account. Keeping track of the child’s “cost” basis in their Trump account is similar to keeping track of the after-taxed contributions made to a “nondeductible” traditional IRA. The after-taxed contributions made to a nondeductible traditional IRA represent the “cost” basis in the traditional IRA. When a nondeductible traditional IRA owner who has kept track of the IRA’s “cost” basis (using IRS Form 8606 – Nondeductible IRAs) makes withdrawals from the IRA, only the earnings portion of the withdrawal are subject to income tax.

State Income Tax Surprise With Trump Accounts

Those parents who own 529 college savings plans are aware that accrued earnings and investment gains are tax-deferred at both the federal and state levels. If the investment gains are withdrawn from the 529 college savings plan are used to pay for qualified education expenses , the withdrawals are federal and state income tax-free.

While federal income taxes are tax-deferred (until they are withdrawn) on accrued earnings on Trump Accounts, several states will tax the accrued earnings each year (as wells as the federal government $1,000 “seed” contribution and any contributions from employers and charities). Parents and legal guardians interested in opening up a Trump Account for their children are advised to check with their state revenue and tax department as to how their state will tax accrued earnings in Trump Accounts.