Trump Accounts officially opened for funding on July 4, 2026, and the IRS closed out June with guidance that removes a major planning headache for families. Here’s a quick update and what we recommend next.
The Basics
Trump Accounts (Section 530A accounts) are IRA-style savings accounts for children under 18, created by the One Big Beautiful Bill Act.
- Eligibility: Any U.S. child under 18 with a Social Security number.
- $1,000 seed deposit: Children born January 1, 2025–December 31, 2028 get a one-time $1,000 federal contribution.
- Contribution limits: Up to $5,000/year per child from any combination of family, friends, and employers (employer contributions, up to $2,500, count toward the same cap).
- Investments: Low-cost U.S. stock index funds only until age 18, no bond or international options yet.
- Access: Locked until 18, then it converts to the child’s control, functioning like a traditional IRA.
How Distributions Are Taxed
Once the account converts at 18, it’s treated like a traditional IRA:
- Ordinary income tax applies to withdrawals of pre-tax contributions and all earnings.
- After-tax (personal) contributions aren’t taxed again, but withdrawals are pro-rated between taxable and non-taxable amounts, you can’t choose to withdraw basis first.
- 10% early withdrawal penalty applies to withdrawals before age 59½, with exceptions similar to a traditional IRA (first-time home purchase up to $10,000, higher education, death, disability, and a few others).
- After 59½, withdrawals of basis remain tax-free; earnings are still taxed as ordinary income. RMD rules apply, same as a traditional IRA.
What Changed
1. Gift tax safe harbor (IRS Rev. Proc. 2026-25, June 29, 2026). Contributions to a Trump Account could technically be treated as a “future interest” gift, triggering a Form 709 filing even for small amounts. The new safe harbor eliminates that requirement, if all three apply for the year:
- The donor’s only taxable gifts are Trump Account contributions;
- Total gifts to that child (including the Trump Account contribution) stay at or under the $19,000 annual exclusion; and
- The donor isn’t otherwise required to file a gift tax return for that year.
This doesn’t create a bigger exclusion, it just confirms the contribution counts toward the existing $19,000. A grandparent contributing $5,000 still has $14,000 of room left for other gifts to that child. Clients making larger gifts, gifting to the same child from multiple family members, or already filing a gift tax return for other reasons should talk to us first. The $1,000 federal seed deposit has no gift tax implications at all.
2. Accounts can now be funded. As of July 4, 2026, money can actually go into accounts that were previously just elected.
Next Steps
If you’ve already filed for an account:
- Confirm it’s active and funded (check the Trump Accounts app, built by BNY Mellon and Robinhood).
- Decide your annual contribution amount, factoring in other gifts to the same child that could push you past the $19,000 safe harbor threshold.
- If your employer offers a matching contribution through a cafeteria plan, confirm enrollment deadlines.
- Check your state’s conformity, not all states follow the federal tax treatment.
If you haven’t opened one yet:
- File Form 4547 at irs.gov/trumpaccounts or trumpaccounts.gov. This also elects the $1,000 seed deposit for eligible children.
- Priority order if multiple people want to open it: legal guardian → parent → adult sibling → grandparent.
- Take the $1,000 seed money if eligible, even if you don’t plan to contribute further.
Our Recommendation
Keep a simple annual log of total gifts to each child (Trump Account contributions plus any other cash gifts) so it’s clear whether the safe harbor still applies year to year — especially if you’re gifting to multiple grandchildren or making other gifts outside the account.
