Trump Accounts: Planning Opportunities, Tax Considerations, and Practical Roadblocks

The One Big Beautiful Bill Act created a new type of restricted custodial investment account for eligible children under the age of eighteen. Unlike Roth and traditional IRAs, Trump Accounts do not require the beneficiary to have earned income before contributions can be made. These new accounts have created both opportunities and questions for families and advisors as they determine how they fit alongside current 529 plans, Roth IRAs, ABLE accounts, and gift transfer-tax rules. Treasury still needs to provide additional interpretations on these accounts, and the information below is current as of the date of the article.

Below are key items individuals need to know regarding these accounts.

Eligibility

• The beneficiary must not have turned 18 by the end of the calendar year for which the election is made.
• The beneficiary must have a valid Social Security number issued before the election is made.
• One Trump account per individual; therefore, parties (parents, other family members, employers, etc.) will need to coordinate to avoid duplication.

Making the Election

Effective September 30, 2026, the Department of the Treasury issued temporary regulations that the IRS will elect to establish an automatic account for each eligible child for which no account has already been opened.

Before the proposed regulations, individuals could make the election by one of the three methods below:

• File Form 4547 with tax return
• Make the election after downloading the Trump Accounts App.
• Log in to your ID.me account on the IRS website.

Important Timelines

• Setup can take place prior to December 31^st of the year the beneficiary turns 17
• During the calendar year the beneficiary turns 17, the account can be rolled over into an ABLE account.
• From January 1^st of the year the beneficiary turns 18, the account behaves like a traditional IRA.

Gift Tax Safe Harbor

Originally, Section 530A contained no language deeming contributions as a present interest gift; therefore, since the funds will not be accessed until a future date under a literal interpretation, the contributions were not eligible for the annual exclusion ($19,000 for 2026) and exposed to both gift and Generation Skipping Tax (GST) tax.

On June 29, 2026, the Department of the Treasury issued Revenue Procedure 2026-25 providing a gift tax safe harbor for certain contributions to Trump accounts. However, only those contributions that meet all five requirements listed below will qualify.

• The donor must be an individual.
• The contribution to the Trump Account must be cash.
• Total gifts to each account beneficiary that year must stay at or under the Section 2503(b) exclusion ($19,000 for 2026).
• Donors need to evaluate other gifts to the account beneficiary to ensure they stay at or under the annual exclusion amount ($19,000 for 2026).
• Contributions trigger no gift or GST tax after the donor’s remaining applicable credit and GST exemption.
• No gift tax return is otherwise required.

Safe Harbor Roadblocks

Under a literal interpretation, outside the Rev. Proc. 2026-25 safe harbor, the contribution is no longer a present-interest gift; thus, it is not subject to the annual exclusion, and a gift tax return will need to be filed, even if the contribution is below $19,000.

Any one of the following will nullify the use of the safe harbor mentioned above.

• If any specific beneficiary’s total gifts (from all sources) are over the annual exclusion ($19,000 for 2026).
• A gift tax return (Form 709) is filed for any other reason.
• A contribution in or after the beneficiary turns 18.
• A noncash contribution to the account.
• A donor that isn’t an individual (Entity, trust, or estate).

Contributions and Basis

Contributions are limited to $5,000 (other than exempt contributions) per child per calendar year for 2026 and 2027 and adjusted for inflation after 2027. There are five types of contributions that can be made during the growth period.

• Federal pilot program contributions of $1,000 for children who are U.S. citizens born between January 1, 2025, and December 31, 2028, who requested the contribution on a filed Form 4547.
• Qualified general contributions from government and charitable organizations.
• Under IRC Section 128, employers are permitted to make contributions that are excluded from the employee’s gross federal income (up to $2,500 per employee per year, adjusted for inflation).
• Qualified rollover contributions (trustee-to-trustee rollovers of a prior account). Rollovers may also be made to an ABLE account of the beneficiary as well.
• Contributions from the account beneficiary, parents, grandparents, or any other individual.

According to IRS Notice 2025-68, contributions to a Trump account are not included in income to the account beneficiary when the contribution is made. Still, distributions are subject to tax to the extent they exceed the basis from certain contributions. Because multiple sources of contributions have different basis rules, owners must track the basis of plan contributions from the beginning. Qualified after-tax individual and family member contributions, along with employer contributions that fail IRC Section 128, add to the account’s basis. While the federal pilot program contribution, qualified government and charitable contributions, and employer Section 128 contributions do not create basis in the Trump Account.

Another Tool in the Toolkit

These accounts provide families with another tool to utilize an additional seventeen years in the market for their children, assuming the beneficiary would have begun investing for retirement at age eighteen. For high-net-worth families, parents can contribute up to $190,000 into a 529 Plan at birth by gift-splitting and making a 5-year election. After the five years, the parents can contribute the $5,000 maximum amount (indexed for inflation) into a Trump for an additional twelve years of retirement savings growth, and the beneficiary can do a Roth conversion at eighteen.

However, the average American household may face a tougher decision as it weighs competing accounts for the same dollar.

The table below provides a comparison of the three primary accounts many individuals will need to consider when deciding which accounts to open and contribute.

As Treasury continues to provide clarification on these items, individuals should consult their tax and financial professionals about which method best fits their unique situation.