Trump Accounts are a new type of individual savings accounts for eligible children who are under age 18 at the end of the calendar year when the election is made. A one-time $1,000 pilot program contribution from the federal government into a Trump Account will be made for each eligible child who is a U.S. citizen and born on or after Jan. 1, 2025, through Dec. 31, 2028.
You can start making contributions to Trump Accounts on July 4, 2026. An employer may contribute to a Trump Account for an employee or an employee’s dependent, up to $2,500 per year, which counts against the $5,000 annual limit under an employer’s Trump Account contribution program. The contribution won’t count toward the employee’s taxable income. Certain government entities and charities may make qualified general contributions as well. Other people can make contributions up to an aggregate limit of $5,000 per year.
Funds in Trump Accounts must be invested in certain mutual funds or exchange-traded funds that track the S&P 500 or another index primarily in American equities. Money cannot be withdrawn from the accounts before Jan. 1 of the calendar year when the child turns 18 years old. At that point, the account is treated as a traditional IRA and is subject to the same rules as other traditional IRAs.
Just the beginning
The IRS requests comments on numerous issues related to Trump Accounts and is posting a draft version of Form 4547, Trump Account Election(s). When final, the new form can be used to establish a Trump Account and to enroll in the pilot program.
The idea is a financial head start for new parents, provided by The Working Families Tax Cuts and available to be opened by families starting next year. When you use Form 4547, you’ll apply for an account with the $1,000 provided by the federal government. The Treasury Department will send instructions on how to activate the account. On July 4, the accounts can take up to $5,000 in deposits annually from parents, their employers or charities. No money can be withdrawn from the account before age 18 without penalties.
Some aspects are not clear yet — the IRS only began issuing guidance in early December. In fact, some information in this article may change before the launch date. Financial planners are still mulling over the details, wondering whether some families might be better off with a 529 plan. For now, your best bet is to work closely with financial professionals for the details and to see whether it’s right for you.
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