IRS Unveils Guidance On Trump Accounts: A Tax-Favored Savings Account Under The One Big Beautiful Bill Act
- SiekmannCo
- Dec 4
- 4 min read
Updated: 4 hours ago
The Internal Revenue Service (IRS) released Notice 2025-68 on Dec. 2, 2025, providing preliminary guidance on Trump Accounts, a new tax-favored savings account designed specifically for children under the age of 18. Established through the One Big Beautiful Bill Act (OBBBA, Public Law 119-21), enacted on July 4, 2025, these accounts aim to foster long-term financial security by encouraging early savings and investment in American enterprises. As a type of traditional Individual Retirement Account (IRA) with specialized rules, Trump Accounts blend tax advantages with restricted investments to promote growth while protecting young beneficiaries.
This development aligns with broader efforts to support working families, as outlined in the OBBBA, and includes a pilot program offering federal seed money for eligible children. Employers, families, and philanthropists can participate, making Trump Accounts a versatile tool for building wealth across generations.
Overview Of Trump Accounts & The One Big Beautiful Bill Act
The One Big Beautiful Bill Act introduces Section 530A to the Internal Revenue Code, creating Trump Accounts as a tax-favored savings account to jumpstart financial independence for minors. These accounts are available starting July 4, 2026, and function under a "growth period" framework, which lasts until the end of the calendar year before the beneficiary turns 18. During this phase, special protections apply to ensure funds are preserved and invested conservatively.
Key features include:
Tax-Free Growth: Contributions are not taxable to the beneficiary, and earnings accumulate tax-deferred, similar to traditional IRAs.
Broad Contribution Sources: Funds can come from parents, guardians, employers, philanthropists, or even the child themselves.
Federal Pilot Program: Children born between 2025 and 2028 may receive a one-time $1,000 contribution from the U.S. Treasury, automatically invested to promote early wealth building.
To establish a Trump Account, taxpayers will use IRS Form 4547, which can now be viewed in draft form on the IRS website. Enrollment in the pilot program occurs via this form during tax filing, followed by an IRS authentication process starting in May 2026.
Eligibility & Establishment Of Trump Accounts
Eligibility for Trump Accounts is straightforward, targeting U.S. citizens younger than 18 to provide a foundation for future financial stability. The account is held in the child's name, with a parent or legal guardian acting as custodian until maturity.
Key Eligibility Details
Age Requirement: Beneficiaries must be younger than 18 at the time of account opening.
Pilot Program Specificity: Only children born from Jan. 1, 2025, to Dec. 31, 2028, qualify for the $1,000 federal deposit, aimed at "jumpstarting the American Dream."
No Income Limits: Unlike some tax-favored savings accounts, there are no family income restrictions, broadening accessibility.
Once established, the account transitions to standard IRA rules post-growth period, allowing the now-adult beneficiary full control.
Contribution Rules & Limits For Trump Accounts
Contributions to Trump Accounts are capped annually to encourage steady, sustainable growth, with adjustments for inflation beginning after 2027. The base limit is $5,000 per year, but certain contributions, such as the federal pilot or those from tax-exempt organizations, do not count toward this cap.
Employer Contributions Under The One Big Beautiful Bill Act
Employers can enhance employee benefits by contributing to Trump Accounts through a Section 128(c) Trump Account Contribution Program, treated as excludable from the employee's gross income. This program must adhere to nondiscrimination rules similar to dependent care assistance plans.
Annual Limit: Up to $2,500 per employee (not per dependent), adjustable for cost-of-living after 2027.
Aggregation Rule: For employees with multiple eligible children, the $2,500 applies in total across all accounts.
Cafeteria Plan Integration: Contributions for dependents can be made via salary reduction under Section 125 plans, but not for the employee's own account.
Notification Requirement: Employers must inform the account trustee that contributions are tax-excludable under Section 128.
Philanthropic boosts, such as Dell's commitment to add $250 to accounts for 25 million children, further amplify potential growth.
Investment Options & Growth Period Rules
During the growth period, Trump Accounts emphasizes low-risk, high-potential investments in U.S. companies to align with the One Big Beautiful Bill Act's pro-American focus.
Permitted Investments
Limited to mutual funds or ETFs tracking U.S. indices, such as the S&P 500.
No leverage, with annual fees capped at 0.1% of the balance.
Examples include holdings in companies such as Nvidia, Caterpillar, Home Depot, and Tesla, promoting investment in "all-American growth."
Additional reporting under Code Section 530A(i) requires detailing contribution sources, ensuring transparency.
Distributions & Tax Treatment
Distributions from Trump Accounts are prohibited during the growth period, except in limited cases, to preserve capital. Post-18, rules mirror traditional IRAs, with tax-deferred growth and potential penalties for early withdrawals unless qualifying for exceptions like education or first-home purchases.
Withdrawals retain tax-favored status, making these accounts an attractive long-term planning tool.
Comparison To Other Tax-Favored Savings Accounts
Trump Accounts build on established tax-favored savings accounts, such as 529 plans and Coverdell Education Savings Accounts (ESAs), but with a broader focus beyond education.
529 Plans: State-sponsored, tax-advantaged for education; contributions may qualify for state tax deductions, with flexible investment options but potential state-specific limits.
Coverdell ESAs: Allow up to $2,000 annual contributions for education expenses, with more investment flexibility than Trump Accounts but income phase-outs for contributors.
UGMA/UTMA Accounts: Custodial accounts for minors, not tax-advantaged like IRAs, but offer unrestricted use upon maturity.
Unlike these, Trump Accounts prioritize U.S. equity investments and include federal seeding, setting them apart under the One Big Beautiful Bill Act.
Future Guidance & Implementation For Trump Accounts
The Treasury and IRS plan to issue proposed regulations on topics such as cafeteria plan coordination and detailed investment criteria. Employers should monitor updates at trumpaccounts.gov and irs.gov for compliance tools.
As Trump Accounts launch in 2026, they represent a shift in family financial planning under the One Big Beautiful Bill Act. For expert assistance in integrating Trump Accounts into your employee benefits, navigating the One Big Beautiful Bill Act, or optimizing other tax-favored savings accounts and retirement strategies, contact The Siekmann Company. Our team delivers comprehensive, compliant solutions tailored to your needs.
