Is Your Child Eligible for a $1,000 Trump Account? Here's How It Works

The recently enacted One Big Beautiful Bill Act established “Trump accounts” for taxable years beginning after December 31, 2025, with contributions there to accepted as of July 4, 2026.  These accounts are a federally coordinated individual retirement account (“IRA”) established for the benefit of an eligible minor, but with special rules that do not apply to other IRAs.  The account’s funding can be initiated through a government pilot program by an authorized individual (who opens and manages the account) electing to have the Secretary of the Treasury make a one-time contribution of $1,000 to the Trump account of an eligible child.  An eligible child is a United States citizen born in 2025 through 2028 (with a Social Security number, and who does not reach eighteen years old before the calendar year end in which the election is made), the authorized individual’s qualifying child (as per Section 152(c) of the Internal Revenue Code of 1986, as amended), and one for whom no prior election has been made.  If this pilot program contribution is not claimed, then management of the Trump account is delegated to the child’s legal guardian, their parent, their adult sibling, and their grandparent, in that order.  Last month, the Department of the Treasury designated The Bank of New York Mellon Corporation as the government’s agent in implementing Trump accounts. 

Trump Accounts: Elections and Contributions

Critically, an existing IRA cannot be transformed into a Trump account, since it must be so designated at the time of its creation.  Otherwise, an authorized individual can subsequently file the election for the $1,000 contribution separately or in conjunction with (though separate from) an income tax return on Form 4547, Trump Account Election(s), or they can elect online at https://trumpaccounts.gov.  If Form 4547 is submitted electronically by your tax professional, From 8879-TA, IRS e-file Signature Authorization for Form 4547, Trump Account Election(s). 

Once established, contributions can be made by from virtually any sources (e.g., the account beneficiary, their parents, employers, etc.), with a $5,000 overall limit (indexed for inflation after 2027).  However, no deduction is allowed to any party for a contribution to a Trump account.  Notably, employers, may set up Trump account programs to make contributions to the accounts of their employees or their children.  Such contributions are excluded from income and are limited to $2,500 per year (indexed for inflation after 2027) per employee (not per child, so there is no increase if the employee has several children with Trump accounts).  That employer limit counts towards the $5,000 overall limit, though qualified rollover contributions and pilot program contributions do not.  Notably, pilot program contributions, general contributions, and employer contributions do not create basis in a Trump account, though qualified rollovers do. 

Rollovers and Distributions 

Aside from qualified rollover contributions, distributions of excess contributions, ABLE rollover contributions, and distributions upon death of the account beneficiary, distributions are not permitted during the growth period.  In that period, Trump account funds must be invested only in mutual funds or exchange-traded funds tracking a broad index of mainly American companies, without leverage, and with annual expenses not exceeding 0.1% of the investment balance.  Hardship distributions are also not permitted from a Trump account, and the account trustee cannot close it and distribute the funds to the account beneficiary.  The trustee must report contributions, distributions, and investment information broadly to the Internal Revenue Service (the “IRS”) and to the account beneficiary. 

Current Trump account guidance is in the form of proposed IRS regulations, and additional clarifications are expected.  Please contact your Schulman Lobel advisor should you have any questions in the interim. 

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Len Sprishen, J.D., LL.M.

Len Sprishen is a Partner at Schulman Lobel Advisors, LLC, where he advises individuals, families, and businesses on tax planning, compliance, and emerging legislation. With advanced degrees in law and taxation, Len provides clients with clear, actionable guidance on complex tax matters.

Questions About Trump Accounts?

The rules surrounding Trump Accounts continue to evolve as additional guidance is released. If you would like to discuss how these provisions may affect your family or financial planning strategy, contact Len Sprishen or your Schulman Lobel Advisor, LLC for personalized guidance.

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