IRS issues initial guidance for Trump Accounts for eligible children
Treasury and IRS released early rules for the new Trump Account program, including eligibility, contribution limits, investment requirements, and the one-time $1,000 federal pilot contribution.
Overview
The notice outlines how Trump Accounts will operate beginning in 2026. It provides rules for establishing accounts, making contributions, handling investments, and coordinating these accounts with existing IRA rules.
Key Provisions
Elections may be made for any eligible child who has not turned 18 by the end of the election year.
Contributions cannot be made before July 4, 2026.
Children born from 2025 through 2028 who are U.S. citizens qualify for a one-time $1,000 federal contribution under the pilot program.
Government entities and charities may make qualified general contributions for a defined class of beneficiaries.
Others may contribute up to $5,000 per year.
Employers may contribute up to $2,500 per year for employees or their dependents under an employer program. This counts toward the $5,000 limit and is excluded from taxable income.
Annual limits will be indexed for inflation starting after 2027.
Investments must be in mutual funds or ETFs that track the S&P 500 or another index of primarily American equities.
Withdrawals generally cannot occur before January 1 of the year the child turns 18. After that point, the account is treated as a traditional IRA.
Why It Matters
Establishes the framework needed for trustees, employers, and families to prepare for 2026 implementation.
Clarifies how federal and third-party contributions interact with annual limits.
Aligns post-age-18 treatment with traditional IRA rules, reducing long-term ambiguity.
Provides draft Form 4547 for making elections and enrolling in the pilot program.
Timeline
2025: Notice 2025-68 released with initial regulatory guidance.
January 1, 2025, through December 31, 2028: Birth window for children eligible for the federal $1,000 pilot contribution.
July 4, 2026: Earliest date contributions may be made.
After 2027: Contribution limits indexed for inflation.
Key Facts
An eligible child must have an election made on their behalf by a parent or guardian.
Accounts function as a separate IRA type until the child turns 18.
Early withdrawals are generally prohibited.
Investment options are restricted to broad American equity index funds.
Statutory Framework
Working Families Tax Cuts created Trump Accounts and the associated contribution rules.
Traditional IRA rules apply once the child reaches the applicable age.
Employer contributions follow the requirements of the §128 employer contribution program.
Forward-Looking Implications
Financial institutions will need to prepare account structures consistent with the investment and withdrawal restrictions.
Employers may add Trump Account contributions to benefit programs.
Families with newborns in the covered years may qualify for the federal pilot contribution.
Additional regulations are expected based on comments requested in the notice.
The Takeaway
The IRS released Notice 2025-68 and a draft Form 4547 to begin implementing Trump Accounts starting in 2026.
The notice provides the first operational roadmap for Trump Accounts, outlining eligibility, contributions, investments, and coordination with IRA rules. More detailed regulations will follow as the Treasury reviews public comments.