IRS Issues Initial Guidance on Trump Accounts for U.S. Children

Key Takeaways 

• Trump accounts are a new type of tax-deferred savings account for U.S. citizen children under age 18, created under the One Big Beautiful Bill Act (OBBBA). 

• The IRS released Notice 2025-68 on December 3, providing the first operational guidance. 

• Accounts may be established beginning July 4, 2026, with withdrawals allowed once the child turns 18. 

• Contributions are subject to annual limits, with special rules for employer, government, and pilot-program funding. 

• Investment options during childhood are tightly restricted to low-cost, broad U.S. equity index funds. 

• The IRS is seeking public comments on proposed rules through February 20, 2026. 

Overview of IRS Guidance on Trump Accounts 

On December 3, the IRS issued Notice 2025-68, its first formal guidance on the creation and operation of Trump accounts, a new savings vehicle established under the One Big Beautiful Bill Act (OBBBA). Trump accounts are designed to encourage long-term savings for U.S. citizen children under age 18 who have a Social Security number. 

The guidance outlines eligibility requirements, contribution limits, investment restrictions, distribution rules, and employer participation options, while signaling that additional proposed regulations are forthcoming. 

What Are Trump Accounts? 

Trump accounts are a new category of tax-deferred account structured as traditional (not Roth) IRA-type trusts or custodial arrangements under new Internal Revenue Code Section 530A. 

Key features include: 

• Eligibility: U.S. citizen children who have not attained age 18 by the end of the year the account is established and who have a Social Security number. 

• Start date: Accounts may be established beginning July 4, 2026. Contributions are not permitted before that date. 

• Withdrawals: Funds may be withdrawn for any reason starting January 1 of the year the child turns 18. 

• Account limits: Only one Trump account per child is permitted, although rollovers between providers are allowed. 

• Setup: Accounts must initially be established with a trustee selected by the U.S. Treasury, using a forthcoming IRS Form 4547 or through trumpaccounts.gov (neither finalized as of this guidance). 

The IRS has indicated it plans to release a model governing document, similar to existing model IRA plan documents, to standardize account administration. 

Contribution Rules and Limits 

Annual Contribution Limits 

• Contributions are capped at $5,000 per year for 2026 and 2027. 

• Limits will be indexed in $100 increments after 2027. 

• Certain contributions do not count toward this limit, including: 

• Pilot-program federal contributions 

• Qualified general contributions from governments or 501(c)(3) organizations 

• Rollovers from other Trump accounts 

Who Can Contribute? 

• Parents, grandparents, and other individuals may contribute. 

• No individual deduction is allowed for contributions. 

• Children do not need earned income to receive contributions. 

Employer Contributions (Section 128) 

Employers may contribute up to $2,500 per employee per year (not per child) for 2026 and 2027, indexed thereafter. 

Important points: 

• Contributions count toward the overall $5,000 annual limit. 

• Contributions are excluded from the employee’s taxable income. 

• Employers must adopt a separate written plan, similar to dependent care assistance plans, with nondiscrimination and notice requirements. 

• Contributions may be offered through a Section 125 cafeteria plan, subject to IRS clarification. 

Federal Pilot Program Contribution 

Under new Section 6434, a federal pilot program provides a one-time $1,000 contribution for eligible children: 

• Applies to U.S. citizen children with a Social Security number 

• Born after December 31, 2024, and before January 1, 2029 

• Funds will be deposited no earlier than July 4, 2026, after enrollment is verified 

The guidance also notes anticipated private and philanthropic funding, including a large commitment from Michael and Susan Dell to support accounts for children in lower-income ZIP codes. 

Timing and Tax Treatment of Contributions 

• Contribution deadline: December 31 of each year (no extended filing deadline). 

• During the growth period (before age 18): 

• Contributions are not included in the child’s income. 

• Pilot, government, and employer contributions do not create tax basis. 

• Other private contributions do create basis. 

• Trump accounts do not affect eligibility for traditional or Roth IRA contributions. 

Investment Restrictions During Childhood 

During the growth period, investments are strictly limited: 

• Permitted investments: 

• Broad U.S. equity index funds or ETFs 

• No leverage 

• No sector-specific or industry-specific indexes 

• Fees: 

• Annual fees capped at 10 basis points (0.10%), excluding broker commissions 

• Prohibited: 

• Money market funds 

• Cash holdings (except temporary balances such as dividends) 

Trustees must select a compliant default investment and enforce all restrictions. 

Distribution and Rollover Rules 

• No distributions are allowed before age 18, except for: 

• Qualified rollovers 

• Death of the child 

• After age 18: 

• Funds may be withdrawn for any reason 

• The account becomes subject to traditional IRA rules, including RMDs and early withdrawal penalties 

• Standard IRA exceptions apply (education expenses, medical expenses, first-time home purchase) 

Rollovers to a traditional IRA are permitted after the growth period. In limited cases, funds may be rolled into an employer retirement plan if the child participates. 

Action Steps for Employers 

Although contributions cannot begin until mid-2026, employers may want to begin planning now by: 

• Evaluating Trump account contributions as an employee benefit 

• Coordinating payroll and benefits administration 

• Monitoring upcoming IRS model plan documents and regulations 

Frequently Asked Questions (FAQs) 

What is a Trump account? 

A Trump account is a tax-deferred savings account for U.S. citizen children under age 18, structured similarly to a traditional IRA and created under the One Big Beautiful Bill Act. 

When can Trump accounts be opened? 

Accounts may be established starting July 4, 2026. 

Do children need earned income to have a Trump account? 

No. Unlike traditional IRAs, earned income is not required. 

Can parents deduct contributions? 

No deductions are allowed for individual contributions. 

What happens when the child turns 18? 

The account becomes subject to traditional IRA rules, and distributions may be taken for any purpose. 

Are investment choices flexible? 

No. During childhood, investments are limited to low-cost, broad U.S. equity index funds with strict fee caps.