The tax season just opened and already half a million families have filed Form 4547 to open Trump Accounts for their kids. If you’re one of them, or just thinking about it, here’s what you need to understand about the tax treatment based on direct guidance from IRS Notice 2025-68. The guidance is clearer than expected on some points, messier on others. Let’s walk through what matters.
What are Trump Accounts?
Trump Accounts (officially Section 530A accounts) are custodial IRAs for kids under 18. They’re part of the One Big Beautiful Bill Act signed last July, and they go live for contributions on July 4, 2026. They allow for a $1,000 federal contribution for kids born between January 1, 2025 and December 31, 2028. That’s free money that’ll grow tax-deferred for potentially 18 years before the account converts to a traditional IRA.
Beyond the initial investment, the structure creates some interesting planning opportunities, but also a few potential landmines to be aware of when considering.
The Growth Period Rules
From when you open the account until December 31 of the year before your kid turns 18, special rules apply. The IRS calls this the “growth period” and it’s when Trump Accounts work differently than regular IRAs.
Contributions: Up to $5,000 per year aggregate from all sources (indexed after 2027). No earned income requirement, which is huge. Your newborn can have an investment account getting tax-advantaged growth immediately. Parents, grandparents, friends—anyone can contribute. The money goes in after-tax but grows tax-deferred. When your kid eventually takes distributions after 18, they’ll pay ordinary income tax on the earnings (not the basis).
Investments: This is where some restrictions apply. During the growth period, funds must be in low-cost index funds tracking primarily U.S. equities such as the S&P 500 or similar. Expense ratios are capped at 0.10% (10 basis points), and no leverage is allowed. There’s not room for a personalized strategy, no individual stocks, no bonds, no alternatives. The statute is clear, applying to eligible investments only.
Distributions: Generally prohibited until the year the child turns 18. Limited exceptions for death, rollovers between Trump Accounts, or correcting excess contributions. Even hardship withdrawals are not permitted. This makes these accounts a locked box until the child turns 18.
The Employer Angle
A relevant bit of information for business owners and CFOs is that under new Section 128, employers can contribute up to $2,500 per year to Trump Accounts for employees or their dependents.
Point of clarification: that’s $2,500 per employee, not per dependent. If an employee has three kids, the employer can still only put in $2,500 total, counting toward the $5,000 annual aggregate limit.
The employer contribution is:
Deductible as a business expense
Excluded from the employee’s gross income (not taxable to them)
Must be made through a separate written program meeting Section 128 requirements
For employers considering this as a benefit, the math is compelling. Tax-free compensation that directly benefits employees’ families, particularly younger employees with kids. It’s cheaper than equivalent cash comp and arguably more valuable to the recipient. The catch is that the program needs proper structure. Think similar to Section 129 dependent care assistance programs: nondiscrimination testing, written plan document, employee notifications, etc.
What Happens at 18
Once the beneficiary turns 18, the Trump Account becomes a traditional IRA. All the growth period restrictions disappear. Suddenly they can:
Invest in anything a regular IRA allows
Take distributions (subject to normal IRA tax rules)
Convert to a Roth IRA if they want
That last option is worth considering. If your child has low income at 18, for example, they are in college and working a side job, a Roth conversion might make sense. They’d pay tax on the pre-tax amounts (the $1,000 federal seed plus any employer contributions) at their presumably low rate, then get tax-free growth going forward.
A good thing to keep in mind here is that tracking basis still matters. Notice 2025-68 is explicit: Trump Accounts have separate basis tracking. You can’t aggregate them with other IRAs for the pro-rata rule. Good for simplicity, but you need meticulous records showing what was after-tax personal contributions versus pre-tax federal/employer money.
The Qualified General Contribution Wildcard
Buried in Notice 2025-68 is the framework for “qualified general contributions”—funding from state/tribal governments or 501(c)(3) organizations to designated groups of kids.
Michael and Susan Dell just pledged $6.25 billion to provide $250 to 25 million children born 2016-2024 in zip codes with median household income under $150,000. That’s a qualified general contribution.
These are treated as “exempt contributions”—they don’t count toward the $5,000 annual limit and don’t create basis in the account. Basically free money that grows tax-deferred.
If you’re in a qualifying demographic, you might have multiple funding sources stacking: the $1,000 federal seed, employer contributions, personal contributions, and charitable contributions. Run the numbers. A kid born in 2025 with $1,000 federal + $250 Dell + $5,000 annual personal contributions through age 17 could easily have a six-figure account at 18.
What’s Still Unclear
The IRS requested comments by February 20, 2026. Several issues remain open:
Detailed trustee requirements and documentation standards
How Trump Accounts interact with other tax-advantaged accounts for aggregation purposes
Rollover procedures and timing
Employer program compliance details (especially ERISA interaction)
State tax law differences. For example, some experts say that it’s likely Trump accounts are not tax deferred under CA law.
Proposed regulations are coming and some (including election procedures, pilot program) may drop before the comment period closes. Final regulations will follow the usual notice-and-comment process.
In the meantime, Notice 2025-68 is what taxpayers and practitioners can rely on. It’s labeled as guidance you can use while awaiting formal regulations.
Practical Takeaways
If you’re eligible for the $1,000 pilot contribution (kid born 2025-2028) and want to apply for a Trump account, file Form 4547 with your 2025 tax return. Even if you never contribute another dollar, that $1,000 growing tax-deferred for 18+ years could be worth claiming for your child.
For everyone else with kids under 18: compare Trump Accounts to alternatives. The investment restrictions are real—you’re stuck in broad equity index funds during the growth period. That might be fine (especially with the low fee requirement), but it’s less flexible than other options such as a 529 or custodial brokerage account (individual brokerages may vary, do your research).
If you open the account and continue contributing, keep detailed records of contribution sources. You’ll thank yourself in 18 years when you’re trying to figure out basis for a potential Roth conversion.
Lastly, continue to watch for updated IRS guidance (or subscribe to our Substack and we will do it for you). This is brand new infrastructure and refinements are coming.
A Final Note on Naming
Look, I get it. The name is polarizing. But that’s the statute—Section 530A accounts are called Trump Accounts in the law itself. You can have whatever opinion you want about that.
From a tax planning perspective, the name is irrelevant. What matters is the structure: a tax-deferred growth vehicle with meaningful federal funding for eligible kids and solid employer contribution incentives.
If the account fits your family’s financial goals, use it. If it doesn’t, don’t. The tax code doesn’t care about your politics, and neither should your financial planning.
This content is for educational purposes only and does not constitute tax, legal, or financial advice for your specific situation. Trump Accounts are new, and guidance continues to evolve. Consult with a qualified tax professional before making decisions.
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