The 2025 tax act established a new deferred tax savings account specifically for children (26 USC 530A) and referred to as a “Trump account”. Under the law the account is to be treated as an individual retirement account. As with all new laws, many questions remain and regulations have yet to be issued. The IRS issued its first notice regarding these accounts in December 2025 in an attempt to address some of the questions which have arisen regarding the application of the new law. The purpose of this publication is to provide general information regarding these accounts.

What is a “Trump account”?

An account which is:

1. Established as an IRA account and not designated as a Roth IRA account.
2. The subject of an election to designate the account as a “Trump account”. The election form, IRS Form 4547, is still in draft form.

Form: https://www.irs.gov/pub/irs-dft/f4547–dft.pdf

Proposed instructions: https://www.irs.gov/pub/irs-dft/i4547–dft.pdf

3. Created for the exclusive benefit of an eligible individual or an eligible individual’s beneficiaries OR is created in the United States for the exclusive benefit of an individual who has not attained the age of 18 before the end of the calendar year, or such individual’s beneficiaries, and is funded by a qualified rollover contribution. An eligible individual is one who:
4. Has not turned 18 before the close of the calendar year in which the election to open the account is made.
5. Has been issued a social security number before the election to open the account is made.
6. Designated as a “Trump account” at the time of its establishment in the manner prescribed by the Secretary of the Treasury.
7. One where the terms of the written document creating the account provide that:
8. Contributions to the account cannot be made prior to July 4, 2026.
9. Contributions made in any calendar year before the calendar year in which the account beneficiary attains the age of 18 cannot result in aggregate contributions in excess of $5,000 (the “contribution limits”-these will be adjusted for inflation) unless the contribution is exempt from the application of the limit.
10. Distributions from the account will be not be allowed before the first day of the calendar year in which the account beneficiary turns 18.
11. The account funds will not be invested in any asset other than eligible investments during any period before the first day of the calendar year in which the account beneficiary turns 18.

-Eligible investments are defined as any mutual fund or exchange traded fund which tracks a qualified index, does not use leverage, does not have annual fees/expenses of more than 0.1 percent of the balance of the investment fund and meets other requirements determined by the Secretary of the Treasury.

-A qualified index is Standard and Poor’s 500 stock market index or any other index which is comprised of equity investments primarily in US companies and for which regulated futures contracts are traded on a qualified board or exchange. A qualified index cannot include any industry or sector-specific index, but may include an index based on market capitalization.

What rules apply to contributions made to the account?

1. Contributions made to the account prior to the first day of the calendar year in which the account beneficiary turns 18 are not deductible.
2. Unlike regular IRAs, contributions can be made to the even if the account beneficiary does not have earned income.
3. Contributions made to the account prior to the first day of the calendar year in which the account beneficiary turns 18 are limited to $5,000 per year, adjusted annually for inflation.
4. “Qualified rollover contributions” are direct trustee to trustee rollover contributions from a Trump account for the benefit of the beneficiary to another Trump account for the benefit of the beneficiary. These contributions do not count towards the contribution limit so long as the full balance is transferred from one account to the other.
5. “Qualified general contributions” are exempt from the contribution limit. These contributions are those funded by states, the federal government, the District of Columbia, an Indian tribal government, and certain tax exempt organizations for members of a specifically defined class of beneficiaries. For more information see 26 USC 530A(f).
6. Contributions under the pilot program (see below) do not count towards the $5,000 contribution limit.
7. A beneficiary who qualifies for other retirement plans, such as a regular IRA or 401(k) plan may contribute to those plans in addition to the “Trump account”. The “Trump account” contribution limitations do not affect the contribution limitations of the other retirement accounts.
8. Contributions must be made before the end of the calendar year. The rules which permit contributions to be made until the due date of the return do not apply prior to the first day of the calendar year in which the beneficiary turns 18.
9. Contributions can be made to the account by the employer of the beneficiary or by the employer for the benefit of a dependent of the employee (generally the parent of the beneficiary). The contribution is not income to the employee; whether the employee is the beneficiary or a dependent of the employee. The contribution must be made through an employer contribution program which satisfies certain requirements. The amount of the employer’s yearly contribution cannot exceed $2,500, adjusted for inflation. At this time, it appears that employer contributions would be part of the $5,000 contribution limit.
10. Contributions made to the account are not income to the beneficiary.

Beyond the scope of this article are the complex rules which apply to the different types of contributions made to the account as some will affect the beneficiary’s basis in the account and other contributions will not affect the basis in the account.

What rules apply to distributions made from the account?

1. There can be no distributions from the account prior to the first day of the calendar year in which the beneficiary turns 18 except for the distribution of qualified rollover contributions, qualified ABLE rollover contributions, excess contributions and upon the death of the beneficiary.
2. On the first day of the calendar year in which the beneficiary will turn 18, the account turns into a regular IRA account. Any distribution made once it is no longer a Trump account will be subject to income tax on the distribution and an early withdrawal penalty if the beneficiary has not attained the age of 59.5, unless an exception applies to the early withdrawal.

What is the “Pilot Program?

The federal government will contribute $1,000 to the beneficiary’s “Trump account” if certain conditions are met. These are:

1. An election must be made to participate in the pilot program. The election will be made on IRS Form 4547 and can be made at the same time that the account is opened. Link to draft form appears above.
2. The child for whom the election is made must be the “eligible child” of the individual making the election.
3. An “eligible child” is one who:
4. Is a child, a descendant of a child, a brother, a sister, a stepbrother, a stepsister or a descendant of a brother, sister, stepbrother or stepsister of the person making the election
5. Has lived in the same residence as the person making the election for more than half the year.
6. Was born after December 31, 2024 and before January 1, 2029.
7. Is a US citizen.
8. Has a social security number.
9. Has not been the subject of a prior election for the program.

The recent donation from the Dell family for funding of “Trump accounts” is beyond the scope of this newsletter.

Whether setting up a “Trump account” is beneficial is also beyond the scope of this newsletter. It is best to discuss that question with your financial planner/professional who can provide information based on your child’s particular needs, your financial circumstances, the purpose of the account and other tax deferred plans which may be available and which may provide much more flexibility.