IRS Provides Guidance on Trump Accounts
The One Big Beautiful Bill Act (OBBBA) added many tax changes, one of these being the creation of Trump accounts. The IRS recently issued Notice 2025-68, giving additional guidance on these accounts and how they operate.
Trump accounts are a specific type of traditional IRA account that can be established for a child under the age of eighteen that has a social security number. These accounts grow tax deferred similar to a regular IRA account, but a few important distinctions:
- The recipient does not need earned income to contribute to the Trump account.
- The Trump account must be invested in an eligible, low-fee investment that tracks an index of U.S. companies (such as the S&P 500) until the recipient reaches eighteen. Low fee is defined as having less than a .1% expense ratio.
There are various types of nondeductible contributions to a Trump Account. The recipient’s total employer contributions and contributions from other sources cannot be greater than $5,000 in any year.
- A $1,000 pilot contribution from the Secretary for recipients born between 2025 and 2028. These contributions are not tax-deductible and do not increase the tax basis of the account.
- Contributions from other government sources. These contributions are not tax-deductible and do not increase the tax basis of the account.
- Employer contributions to the recipients. These contributions are tax deductible for the employer and are not taxable to the employee. Employers can only contribute $2,500 per employee (not recipient). They also do not increase the tax basis of the account.
- Contributions from other sources. These contributions are not tax deductible but increase the tax basis of the account.
Once these contributions are deposited into the recipient’s account, there are specific reporting requirements including the account’s contributions, distributions, fair market value, and basis before the recipient turns eighteen. During this time, distributions can only be made due to death, rollover, or distribution of excess contributions before the recipient turns eighteen. Once the recipient turns eighteen, the Trump account becomes subject to traditional IRA rules. Due to the creation of Trump accounts, there are new ways to invest in a child’s future.
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