Trump account is a new initiative that is part of Working Families Tax Cuts Act OR One big Beautiful Bill Act as it is more popularly known, introduced by Trump’s government in 2025;
IRS has issued a Notice 2025-68 which clarified a lot of things, however, remember – the IRS is still requesting input from the public to make changes, if the IRS deems necessary.
So what is a Trump account? A Trump Account is a tax-deferred savings account for children under 18. The accounts are designed to grow with investment earnings over time, and when the child becomes an adult, the accounts generally function like a traditional IRA.
Any child under 18 with a valid Social Security number is eligible to open a Trump Account. Parents or guardians must set up and manage the account until the child turns 18.
Trump account – Free $1000 – how to get started?
If you have a child that is born between Jan 1, 2025 to Dec 31, 2028, and a US Citizen with valid social security number, then the Department of Treasury will deposit $1000 to the child’s Trump Account. This is NOT automatic. You have to make the election to be able to receive this $1000 into the Trump Account. Parent or guardian of the eligible child has to file a Form 4547 once it is made available, which is expected to be Dec 31, 2025, you can file this election form anytime once its available, and even with your 2025 US tax returns; If you fail to submit this form with your tax returns, you can also file it online mid-2026 on Trumpaccounts.gov;
What if my child is NOT born between 2025 and 2028?
Now, if your child is born before 2025, can you still take advantage of the Trump Account?
Yes, for any eligible child who is under 18 years old, you can elect to have a Trump account, once the account is activated, a parent or guardian can contribute up to $5000 into the account.
This money can then be invested in US investments, like S&P 500 index. The growth in these accounts is NOT taxed.
That means, the contributions made into these accounts until the child reaches 18 years old, will continue to grow tax free.
Once the child reaches 18 years, the account will become like a regular Individual REtirement Account, that means, your child can let it continue to grow until they reach 59.5, or if your child decides to withdraw, it will be subject to 10% early withdrawal penalty, in addition to tax on growth and pre-tax contributions.
When can you withdraw from a trump account without penalty?
Below is the chart, when your child can withdraw funds from a Trump account without paying a 10% penalty.
| Eligible Distribution Reason | Penalty Waiver? | Taxable? | Notes |
| Higher Education Expenses | YES | YES | Must be for the beneficiary’s qualified higher education expenses (tuition, fees, books, supplies, room and board). |
| First-Time Home Purchase | YES | YES | Up to a lifetime limit of $10,000 for buying, building, or rebuilding a first home. |
| Birth or Adoption Expenses | YES | YES | Up to $5,000 within one year of the birth or adoption |
| Qualified Small Business or Farm Expenses | YES | YES | Expenses related to certain small business or farm loans. |
| Death or Disability | YES | YES | Distributions made after the beneficiary’s death or if the beneficiary becomes totally and permanently disabled. |
| Substantially Equal Periodic Payments (SEPPs) | YES | YES | Distributions taken in a series of equal payments over the beneficiary’s life expectancy. |
| Unreimbursed Medical Expenses | YES | YES | Must exceed the IRS threshold (typically 7.5% of Adjusted Gross Income). |
How much can I contribute to the Trump Account?
| # | Type of Contribution | Source of Funds | Annual Limit | Tax Treatment of Contribution |
| 1 | Pilot Program Contribution | The U.S. Federal Government (Treasury) | $1,000 one-time (for eligible newborns) | Excluded from Income (Tax-Free) |
| 2 | Qualified General Contribution | State, Local, or Tribal Governments, or 501(c)(3) Organizations | No Annual Limit (Must be made to a “qualified class” of beneficiaries) | Excluded from Income (Tax-Free) |
| 3 | Contributions from Other Sources | The Account Beneficiary, Parents, Grandparents, Friends, etc. | $5,000 Aggregate Annual Limit (Indexed for inflation after 2027) | Not Deductible (After-Tax) |
| 4 | Section 128 Employer Contribution | An Employer (of the child or the child’s parent/guardian) | Counts toward the $5,000 Annual Limit (Max $2,500 exclusion) | Excluded from Employee’s Gross Income (Effectively Pre-Tax) |
| 5 | Qualified Rollover Contribution | A prior Trump Account for the same beneficiary (e.g., when changing custodians) | No Annual Limit | Carries over the original tax basis and tax-deferred status. |
How to get free money into a Trump Account without worrying about taxes?
| U.S. Government (Pilot Program) | $1,000 (One-time, for eligible newborns) | Excluded from Income. This seed money is not taxable upon contribution. |
| Employers (Section 128) | Up to $2,500 per year per employee (for a child’s account). | Excluded from Employee’s Gross Income. This is the primary way to get “pre-tax” funds into the account, as the employee does not pay income tax on the contribution. This amount is part of the annual $5,000 limit for individual/employer funds. |
| State, Local, or Tribal Governments | No annual limit. (Must be part of a Qualified General Contribution) | Excluded from Income. These contributions are not taxable to the child when made. They also do not count against the annual $5,000 limit. |
| 501(c)(3) Charities/Nonprofits | No annual limit. (Must be part of a Qualified General Contribution) | Excluded from Income. These contributions are not taxable to the child when made. They also do not count against the annual $5,000 limit |
Top 10 things to know about Trump Account
This notice (IRS Notice 2025-68) is a piece of guidance related to the implementation of Trump Accounts, a type of retirement/savings vehicle specifically created for eligible children.
Here are the top 10 things you should know about this IRS Notice:
- It Establishes a New Account Type: The Notice focuses on rules for Trump Accounts, which are a special type of Traditional Individual Retirement Arrangement (IRA).
- Targeted for Children: The account is for the exclusive benefit of an eligible individual, defined primarily as a child who has not attained age 18 by the end of the year the account is elected.
- SSN is Required: To be eligible, the child must have a Social Security Number (SSN) issued before the election date.
- Election is Required: The account is not automatically created. An election must be made using IRS Form 4547, Trump Account Election(s) (once released) or via the website trumpaccounts.gov.
- Individual Contributions are Not Deductible: Contributions made by individuals (such as parents or the child) are made with post-tax dollars and are explicitly not deductible on tax returns during the child’s growth period.
- Certain Contributions are Tax-Free: Contributions from specific entities—such as the Secretary of the Treasury, States, Tribal Governments, 501(c)(3) organizations, or an employer (under section 128)—are excluded from the beneficiary’s gross income.
- The “Growth Period” is Key: Special rules apply only during the “growth period,” which is the time before the eligible individual reaches age 18.
- Becomes a Traditional IRA at Age 18: Once the eligible individual attains age 18, the Trump Account is automatically treated as a Traditional IRA for all purposes.
- Distributions Follow IRA Rules: Generally, once the account is converted, distributions are governed by the normal IRA distribution rules, which include penalties for early withdrawal and specific rules regarding basis (contributions made with post-tax dollars).
- It’s Interim Guidance: The Notice is an IRS announcement of its intent to issue regulations regarding the Trump Account rules. It serves as preliminary guidance until the official, final regulations and forms (like Form 4547) are fully established and released.
Disclaimer: while we aim to spark your interest and keep things entertaining, please treat everything shared here as food for thought rather than a rulebook for life. Since we don’t have a crystal ball and your situation is as unique as a fingerprint, we cannot guarantee accuracy or specific results, nor should you rely on this as professional advice. Please take these insights with a grain of salt, do your own homework, and always consult a qualified expert before making any big moves—because what works for one person might not work for all!
Leave a Reply