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IRS Issues Guidance on Trump Accounts Established Under the Working Families Tax Cuts
The Department of the Treasury and the Internal Revenue Service recently issued a notice announcing upcoming regulations and providing guidance regarding Trump Accounts, which are a new type of individual retirement account (IRA) for eligible children.
IRS Notice 2025-68 provides a general overview of how Trump Accounts work and addresses certain initial questions about creating initial and rollover Trump Accounts, the $1,000 pilot program contribution, other contributions – including qualified general contributions and section 128 employer contributions – eligible investments, distributions, reporting, and coordination with the rules applicable to other types of IRAs.
The Working Families Tax Cuts provides for establishing a Trump Account on behalf of every eligible child for whom an election is made, generally by a parent or guardian, and who has not turned age 18 before the end of the calendar year in which the election is made. Contributions to Trump Accounts cannot be made before July 4, 2026.
Additionally, the federal government will make a one-time $1,000 pilot program contribution to the Trump Account of each eligible child for whom an election is made, who is a U.S. citizen and who is born on or after January 1, 2025, through December 31, 2028.
Certain governmental entities and charities may also make qualified general contributions to Trump Accounts if given to a qualified class of account beneficiaries. Other persons are also able to make contributions up to an aggregate limit of $5,000 per year. Furthermore, an employer may contribute to a Trump Account of the employee or the employee's dependent up to $2,500 per year (which counts against the $5,000 annual limit) under an employer's Trump Account contribution program, and the contribution will not count toward the employee's taxable income. The annual contribution limits are indexed to inflation and will adjust starting after 2027.
The funds in Trump Accounts must be invested in certain mutual funds or exchange-traded funds that track the S&P 500 or another index of primarily American equities. (For more information on Trump Accounts, you can visit www.trumpaccounts.gov).
Amounts generally cannot be withdrawn from Trump Accounts before January 1st of the calendar year in which the child turns 18 years old. After that point, the account generally is treated as a traditional IRA and generally is subject to the same rules as other traditional IRAs.
The recent notice addresses certain areas of interest to prospective trustees of Trump Accounts and to those individuals, such as parents and guardians, who would like to establish and/or contribute to these accounts. The notice requests comments on numerous issues related to Trump Accounts.
The IRS is posting a draft version of Form 4547, Trump Account Election(s), to its website. When final, the new form can be used to establish a Trump Account and to enroll in the pilot program.
The IRS continues to provide updates and additional information related to the tax benefits from the Working Families Tax Cuts at IRS.gov.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
