Trump Accounts - 2025 elections for 2026 benefits
Let’s talk Trump accounts - we understand that this is a controversial subject and we’d like to evaluate these without the political shroud. We acknowledge that it can be hard to separate politics from tax law (it clearly goes hand in hand), but these are actually a great benefit for minors under 18 and for those who wish to contribute. We’ll analyze some of the benefits below & as always, reach out with questions - we’re here to help.
What Actually is a Trump Account
Trump accounts are tax-deferred savings accounts for children (individuals under the age of 18). You do not need to be born in the years 2025-2029 to establish an account - this has been a huge point of misinformation since the bill passed in July 2025. These accounts act as Traditional IRAs with a couple of special rules during the growth period - the time between election and January 1 of the year the minor turns 18.
Funds can only be contributed to eligibile investments (mutual funds & exchange trade funds or ETFs)
Separate and different contribution limit from other IRAs
Distributions are generally not going to be permitted
There are not tax deductions for contributions made
Eligibility Requirements
Individuals must be under the age of 18 by the close of the calendar year that the election is made in/
Sarah is 17 on 12/31/25. Her parents can make an election to open an account with their 2025 return.
Anna turns 18 on 12/30/25 - she is not eligible to have an account established for her.
The individual must have a Social Security Number before the election is made.
The person making the election for the minor must be a legal guardian, parent, adult sibling, or grandparent. This is also the order of priority given for who can establish.
So What’s the Benefit?
This is a huge benefit for minors and can really set them up for success on their 18th birthday. These accounts can be converted to a Roth IRA when the growth period concludes, and while that is a taxable event, that means that the contributions could continue to grow in a Roth tax-free- for decades until they reach the eligible withdrawal age. That’s huge!
The pilot program has been the major headline this year - that’s the $1000 deposited by the treasury for babies born after 12/31/2024 & before 1/1/2029.
Employers - this is a big opportunity for you if employees have these accounts established. Employers can contribute up to $2500 and this is tax-deductible as a tax-free fringe benefit.
This is where it gets tricky and requires coordination. Parents, family, friends, anyone can make contributions during a tax year - max. contribution is $5000 for the account. For example - Jordyn’s parents elect to establish an account for her. A parent’s employer contributes $2500 leaving $2500 for the family to contribute. Grandpa Bob contributes $2500 and the account reaches it’s cap of $5000 for the year. No further contributions allows.
How Do I Make the Election?
If you’re interested in making the election, let’s talk about it to make sure it all makes sense for you and for the account beneficiary. The election is a form that will be included with your tax return, with accounts projected to be opened by financial entities in Summer 2026.
This is a big one - questions? Reach out!
Sources:
Gorczynski, Tom. Compass Tax Educators. Federal Tax Update (2025)
Wolters Kluwer, Federal Tax Updates (2025)
