Rebecca Acorn, CPA, MST •
A new tax advantaged savings plan is included as part of the One Big Beautiful Bill Act (OBBBA). The plans are commonly known as “Trump Accounts”
A new tax advantaged savings plan is included as part of the One Big Beautiful Bill Act (OBBBA). The plans are commonly known as “Trump Accounts”
What is a Trump Account?
A Trump Account is a tax advantaged savings account for children. These new accounts are similar to traditional IRAs and designed to encourage children and parents to start saving early for college or retirement. To be eligible for contributions, the child beneficiary must have a valid social security number and be a United States citizen.
Tax Treatment
Tax treatment of funds in the account will be similar to the treatment of funds in an Individual Retirement Account. Contributions to these accounts will not be accepted before July 4, 2026. Yearly contributions are allowed until the first day of the calendar year that the beneficiary turns 18.
Annual Contributions
Contributions are limited to $5,000 per calendar year. This amount will be adjusted for inflation after 2027. These contributions are not tax deductible. Up to $2,500 (indexed for inflation after 2027) can be contributed to a Trump Account by the employer of the beneficiary or the beneficiary’s parent. This amount would not be included in the taxable income of the employee. This amount counts toward the annual $5,000 limit.
Governmental entities and nonprofits: Governmental entities (like states) and qualified nonprofits can make contributions to a group of children. These contributions have no limit and do not count against the $5,000 annual limit.
The Federal Government will make a one-time $1,000 deposit in the account of an eligible child. An eligible child is one born after December 31, 2024 and before January 1, 2029 and is a United States citizen with a valid social security number. This contribution does not count toward the annual limit.
Investment Requirements
Funds in a Trump Account have specific investment requirements. The exchange traded fund or mutual fund must: (1) track the return of a qualified index; (2) cannot use leverage; (3) cannot have annual fees and expenses of more than 0.1 percent of the balance of the investment in the fund; and (4) meet any other criteria as established by the Treasury Secretary.
Distributions
Distributions from a Trump Account are generally not allowed before the beneficiary reaches age 18, with the exemption of qualified rollovers. The taxability of earnings and distributed contributions from the account may depend on the source of the contribution. At this time, additional regulations are needed to clarify the taxable distribution amount.
Keep an eye on our blog or follow us on LinkedIn; we’ll continue to share updates as more information becomes available.
A Trump Account is a tax advantaged savings account for children. These new accounts are similar to traditional IRAs and designed to encourage children and parents to start saving early for college or retirement. To be eligible for contributions, the child beneficiary must have a valid social security number and be a United States citizen.
Tax Treatment
Tax treatment of funds in the account will be similar to the treatment of funds in an Individual Retirement Account. Contributions to these accounts will not be accepted before July 4, 2026. Yearly contributions are allowed until the first day of the calendar year that the beneficiary turns 18.
Annual Contributions
Contributions are limited to $5,000 per calendar year. This amount will be adjusted for inflation after 2027. These contributions are not tax deductible. Up to $2,500 (indexed for inflation after 2027) can be contributed to a Trump Account by the employer of the beneficiary or the beneficiary’s parent. This amount would not be included in the taxable income of the employee. This amount counts toward the annual $5,000 limit.
Governmental entities and nonprofits: Governmental entities (like states) and qualified nonprofits can make contributions to a group of children. These contributions have no limit and do not count against the $5,000 annual limit.
The Federal Government will make a one-time $1,000 deposit in the account of an eligible child. An eligible child is one born after December 31, 2024 and before January 1, 2029 and is a United States citizen with a valid social security number. This contribution does not count toward the annual limit.
Investment Requirements
Funds in a Trump Account have specific investment requirements. The exchange traded fund or mutual fund must: (1) track the return of a qualified index; (2) cannot use leverage; (3) cannot have annual fees and expenses of more than 0.1 percent of the balance of the investment in the fund; and (4) meet any other criteria as established by the Treasury Secretary.
Distributions
Distributions from a Trump Account are generally not allowed before the beneficiary reaches age 18, with the exemption of qualified rollovers. The taxability of earnings and distributed contributions from the account may depend on the source of the contribution. At this time, additional regulations are needed to clarify the taxable distribution amount.
Keep an eye on our blog or follow us on LinkedIn; we’ll continue to share updates as more information becomes available.
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