Trump Accounts: What You Need to Know and Plan For

The recently passed One, Big, Beautiful Bill Act (OBBBA) didn’t just lock in the Tax Cuts and Jobs Act provisions—it also created a brand-new savings vehicle: Trump Accounts. While the name will grab headlines, the details are what matter for families and business owners. Here’s a practical breakdown of what they are and how you can plan ahead.

First, What Are Trump Accounts?

Think of them as a cross between a 529 college savings plan and an IRA for kids under 18. Parents, relatives, employers, and even governments or charities can all contribute. The goal: give children a financial head start. I just read that our current generation of kids is the first to be worse off than the generation before - they are poorer, fatter, more depressed. Whatever we can do to help these kids get a head start in life, I think they are going to need it if they ever have a chance at things like home ownership that we have taken for granted.

Key Dates to Keep in Mind

• January 1, 2025 – December 31, 2028: Pilot program—$1,000 federal contribution for each U.S. citizen baby born during this period.

• July 4, 2026: Accounts officially launch and contributions can begin.

• 2028 and beyond: Contribution limits start adjusting for inflation.

Contributions at a Glance

• Parents/Relatives: Up to $5,000 annually (after-tax; no deduction).

• Employers: Up to $2,500 per year, tax-free for employees and deductible for the business.

• Federal Government: $1,000 per newborn (2025–2028 births).

• States/Charities: Can also contribute—without reducing your $5,000 cap.

Withdrawals & Rules

• No withdrawals before age 18.

• Standard IRA rules apply after age 18 (including penalties for early withdrawals before 59½, with exceptions for college tuition or first-time home purchase).

• Investments must be in low-cost mutual funds/ETFs (fees capped at 0.1%).

Planning Tips for Families

1. New Parents: If your child is born between 2025–2028, the government will seed their account automatically—make sure you claim them properly on your tax return.

2. Grandparents & Relatives: This may be a new way to gift with impact—up to $5,000 per year, per child.

3. College vs. Retirement Savings: Because withdrawals follow IRA rules, weigh whether you’d prefer flexibility (Trump Accounts) or tax-free growth for education (529 plans).

   
   

Planning Tips for Business Owners

1. Employee Benefit Option: Employer contributions are deductible and tax-free for employees—a potential recruiting and retention tool.

2. Plan Document Required: Like dependent care FSAs, you’ll need a formal written plan to offer this benefit.

3. Nondiscrimination Rules: Benefits can’t just favor highly paid employees—you’ll need to structure it broadly.

   
   

What’s Next?

The IRS still needs to issue guidance on practical details (like reporting rules and how employer contributions work if employees haven’t opened accounts yet). For now, families with young children and business owners should start considering if and how Trump Accounts fit into their planning strategy.

I’ll continue to monitor updates and share more once we have clearer guidance.