Understanding the Merits of Trump Accounts

When and Who Can Contribute

IRC § 530A(b)(1)(C)(i) does not permit contributions to Trump accounts before July 4, 2026; contributions may be made in any calendar year before the calendar year in which the account beneficiary turns 18. These accounts are for minors, but only “eligible individuals” may have a Trump account. An “eligible individual” means an individual who 1) has not attained the age of 18 before the close of the calendar year in which an election is made to open an account, 2) has a Social Security number, and 3) elects to open an account.

Trump Accounts

The account must be created or organized in the United States for the exclusive benefit of the eligible individual. Trump accounts, with some exceptions, are generally treated like Traditional IRAs, and this type of IRA for minors cannot be designated as a Roth IRA. The following special rules apply to Trump accounts but do not apply to IRAs:

• The account can only hold “eligible investments,” which are mutual funds or exchange traded funds (ETFs) that 1) track a qualified index (e.g., S&P 500) of primarily US companies; 2) do not use leverage; and 3) do not have annual fees of more than 0.1% of the balance of the investment in the fund [IRC § 530A(b)(3)].
• Contributions are limited to $5,000 (other than exempt contributions) per calendar year. The limit is indexed for inflation (to a multiple of $100) and “exempt contributions” mean rollover contributions, qualified general contributions (a government agency or charity can give money to a class of children), and any contributions provided under the pilot program.
• Distributions are generally not permitted before the first day of the calendar year in which the account beneficiary attains age 18. This period before distributions are permitted, that is, between the first gift to the account and the first day of the calendar year when the beneficiary reaches age 18, is referred to as the “growth period.”
• There is no federal deduction (i.e., § 219) allowed for contributions to a Trump account.
• Trustees of Trump accounts have special reporting under IRC § 530A(i) to the Secretary of the Treasury and the beneficiary of the account.

In the calendar year that the beneficiary attains the age of 18, the account is generally no longer a Trump account (an IRA with special rules). From this point on, the Trump account is treated as a traditional IRA with some basis considerations, discussed below.

Contributions and Basis

Much of the complexity around Trump accounts relates to the various types of contributions and whether such contributions can create basis. There are five types of contributions that can be made during the growth period:

• Pilot program contributions of $1,000 from the Treasury Secretary.
• Qualified general contributions from the government or charitable organizations.
• Employer contributions that are not includible in the gross income of the employee under IRC § 128 (up to $2,500 per employee per year, adjusted for inflation, made pursuant to a separate written employer plan for this purpose).
• Qualified rollover contributions (transfers from a predecessor Trump account for the same child). Rollovers may also be made to an ABLE account of the beneficiary as well.
• Contributions from other sources, such as the account beneficiary, parents, grandparents, or any other person.

IRS Notice 2025-68 notes that contributions to a Trump account are not includible in income by the account beneficiary when made, but there is explicit statutory exclusion from gross income for qualified general contributions under IRC § 139J(a). These accounts are subject to tax later, when distributions are made, except to the extent of basis created through certain contributions.

Pilot contributions, qualified general contributions, and employer contributions do not create basis. Contributions from other sources do create basis. During the growth period, IRC § 530A(i) requires the trustee (e.g., bank) to fulfill special reporting requirements, including noting changes to the account’s basis. After the growth period, basis will likely be tracked on IRS Form 8606, just like any other IRA.

It is important to note that under IRC § 408(d)(2), the owner of an IRA must aggregate all traditional IRAs when making use of basis from after-tax contributions. IRC § 530A(h)(4) requires Trump accounts to be aggregated only with other Trump accounts and not with other IRAs. It may be worthwhile to consider converting former Trump accounts to Roth IRAs when the growth period ends because any basis from the growth period could reduce the amount of taxable income recognized on a Roth conversion. In general, income from property received as a gift can be subject to the “kiddie tax.” At this point in time, the mechanics of reporting a Roth conversion where basis needs to be factored in (via IRS Form 8606) should reflect the taxable portion (i.e., earnings) of the conversion as ordinary income on the 1040, and as a result, it may be subject to the kiddie tax for a full-time student.

Gift Tax Considerations

As of the date of this writing, annual exclusions may not be used when funding a Trump account. Ordinarily, only gifts of a “present interest” qualify for the annual exclusion of up to $19,000 for 2026 under IRC § 2503(b). The present interest requirement means that the donee must have an immediate and unrestricted right to use, possess, or enjoy the property. Nevertheless, the code often provides an exception to this requirement when dealing with gifts to minors. For example, gifts to 529 plans are not considered a gift of a future interest under IRC § 529(c)(2). Likewise, IRC § 2503(c) treats certain gifts in trusts for minors as not constituting a future interest. If this is not addressed by future regulations or a technical correction, then a gift tax return would technically be required to be filed, which was likely never the intention.

The Merits of Opening a Trump Account

A parent or a guardian can open a Trump account for an eligible individual by filing IRS Form 4547 with their return. That form allows one to elect to receive the $1,000 pilot program contribution. As an alternative, an authorized individual (e.g., legal guardian, parent) may create an account at trumpaccounts.gov and elect to receive any pilot program.

The primary benefit of a Trump account is the ability to provide an additional 17 years in the market, assuming the account beneficiary would have begun saving for retirement at age 18. For high-net-worth individuals, this becomes one additional tool to optimize their child’s wealth. Upon birth, they can do a 5-year election, and with gift-splitting, they can get $190,000 into a 529 plan, which will reasonably cover the cost of an undergraduate degree in 17 years. At age 6 (after the 5-year period), they can begin putting the maximum amount of $5,000 (indexed for inflation) into a Trump account. This may provide 12 years to grow retirement savings. Assuming gift tax annual exclusions are used by both parents, the remaining gift would be paid to either a Uniform Transfers to Minors Act (UTMA) account, if they want their child to have access to the funds at the age of majority, or in trust, if control and asset protection takes a higher priority.

For the average American household, this decision becomes difficult because there are competing interests. If one family’s budget permitted $5,000 of annual savings for their child, should all of it go into a Trump account? It may be more beneficial tax-wise to contribute to a 529 plan in the child’s youngest years. Oftentimes, a 529 plan is in a target date fund and becomes more conservative as they get closer to age 18. A couple might consider investing predominantly into a 529 plan at younger ages so they can benefit from the tax-free earnings it can provide for qualified educational expenses. They may then contribute more to a Trump account, especially in the years leading up to college. This becomes more compelling as 529 plan contributions made just before entering college may provide little income tax free earnings, while the benefit of converting a basis-heavy Trump account to a Roth IRA during college could be very valuable. Early career Roth conversions of former Trump accounts coupled with special rollovers to Roth IRAs from 529 plans under IRC 529(c)(3)(E) can provide substantial income tax free assets later in retirement. While there is no definitive right answer, Trump accounts now provide another tool in the CPA financial planner’s toolbox.