The OBBBA Creates Trump Accounts for Minors
Published on by Jessica Fleming in Tax Services
As part of the recently enacted the One Big Beautiful Bill Act (OBBBA), a new type of tax-advantaged investment account has been created for individuals under the age of 18 called the Trump Account. These accounts are designed to encourage early savings and investment for children and young adults, with defined contribution rules, tax advantages, and even a government-funded pilot program for newborns. Set to take effect for taxable years beginning after December 31, 2025, Trump Accounts present a unique opportunity for families to begin long-term financial planning at an early stage.
Establishment of account
Eligibility for a Trump Account is limited to individuals under the age of 18 who have a valid Social Security number. Accounts may be established by the Secretary of the Treasury or by parents or guardians on behalf of the child. To qualify, the account must be officially designated as a “Trump Account” at the time it is opened. These accounts apply to taxable years beginning after December 31, 2025, meaning contributions and account activity will only be recognized under the law starting in the 2026 tax year.
Contribution limits and guidelines
Annual contributions of up to $5,000 per beneficiary are allowed, though contributions made before the beneficiary turns 18 are not tax-deductible. These contributions also do not count toward the individual’s IRA contribution limits until they reach age 18. Employers may contribute up to $2,500 per year to Trump Accounts for employees or their dependents, with those contributions counting toward the $5,000 annual limit. Additionally, contributions from certain governmental or charitable entities are allowed and are excluded from the beneficiary’s gross income.
Investment and distribution rules
Funds in a Trump Account must be invested in a diversified fund that tracks a well-established index of U.S. equities. The account grows tax-free until distributions are made, and annual fees may not exceed 0.1% of the account balance. Distributions are generally not permitted until the beneficiary turns 18, except in cases of rollover or death. Funds may be rolled over into another Trump Account or into an ABLE account for disabled individuals. If contributions exceed the allowed limit, the excess and related earnings must be distributed and may be subject to penalties.
Tax implications and reporting requirements
Distributions made after the age of 18 are taxed similarly to those from traditional IRAs, including required minimum distribution (RMD) rules. Account trustees are responsible for reporting contributions, distributions, account balances, and other relevant information to both the IRS and the account beneficiary.
The government-funded pilot program
To promote participation from the start, the federal government will provide a $1,000 contribution to every eligible newborn born between January 1, 2025, and December 31, 2028. These government-funded Trump Accounts will serve as a pilot to encourage families to begin saving early and to build awareness of this new investment vehicle.
What to do next
Trump Accounts offer a new avenue for families to build financial security for children and young adults. With clear rules around contributions, investments, and tax treatment, these accounts could become a popular tool for early financial planning.
If you have questions about how Trump Accounts might benefit your employees, contact our tax advisors today for a free consultation to discuss your specific situation. You can also learn more about what the OBBBA means for individuals and businesses here. As always, we’re here to help.
