“Editor’s Note (Updated July 2, 2026): After this article was published, the IRS issued Rev. Proc. 2026-25, offering some limited gift tax relief. Many individual donors making cash contributions to these accounts can now claim the annual exclusion with no Form 709 required. However, it is an all-or-nothing consideration: if your total gifts to that child top the annual exclusion, or you otherwise have to file a gift tax return that year, the contribution automatically reverts to a future interest gift and loses its eligibility for the annual exclusion. Because that line is easy to cross, please reach out to your Snyder Cohn advisor before funding a Trump Account.”
A new tool for wealth transfer arrives this July by way of the newly created “Trump Accounts”. Eligible newborns may receive a $1,000 government seed contribution – a strong foundation for long-term compounding. However, families looking to contribute beyond that should understand the contribution limits, gift tax consequences, and year-end deadlines before funding any additional contributions.
What Is a Trump Account?
A Trump Account is a traditional IRA established for an eligible child. From account opening through December 31 of the year before the child turns 18, no distributions are permitted, with only four narrow exceptions (a qualified rollover to another Trump account, a qualified ABLE rollover in the year the beneficiary turns 17, correction of an excess contribution, or death of the beneficiary). Unlike a standard IRA, there is no option to take an early withdrawal subject to a 10% penalty during this period – distributions are barred outright until the account converts to a traditional IRA at age 18. Contributions during the growth period are not deductible. On January 1 of the year the child turns 18, the account transitions to standard traditional IRA rules.
| Feature |
Growth Period (Birth–17) |
Post-Transition (Age 18+) |
| Distributions |
Strictly prohibited |
Standard IRA rules* |
| Deductibility |
Non-deductible |
Standard IRA rules* |
| Exceptions |
Narrow |
Standard IRA rules* |
*Once the account transitions at age 18, it operates as a standard traditional IRA in the child’s name. Distributions become taxable as ordinary income except to the extent of basis (i.e. individual contributions already taxed), and the same 10% early withdrawal tax and exceptions that apply to any traditional IRA (including for higher education expenses and first-time home purchases (up to $10,000)) become available. These are not special Trump Account exceptions; they are the standard IRA rules. The account holder may continue making contributions, subject to normal IRA earned income requirements and annual contribution limits. Those contributions may be deductible depending on income and workplace plan coverage. Third-party contributions from parents or other family members are no longer permitted at that point.
The account holder may also be eligible for Roth conversions, potentially giving the child a significant head-start on building tax-free retirement savings well before their working years begin.
Who Is Eligible to Own a Trump Account and How Do You Open One?
Any child under 18 with a valid SSN qualifies, with no income limits. An authorized individual (a parent, legal guardian, adult sibling, or grandparent, in that priority order) opens the account by filing Form 4547. This can be done at any time before the child turns 18 and can be filed alongside your federal tax return or on its own—including after you’ve already filed, for example following the birth of an eligible child. The IRS has set up trumpaccounts.gov with filing details and additional resources.
Children born January 1, 2025–December 31, 2028, also qualify for the $1,000 government seed, which is elected separately on Part III, Line 7 of the same form. If you open the account first without electing the $1,000 contribution, you can still file Form 4547 again later to add that election, if the child still qualifies. The one-time limits that do apply: only one election to open an account is ever processed per child, and only one $1,000 pilot election is ever processed per child.
After filing, Treasury sends activation instructions to the person who filed, who must complete an authentication step before the account is usable. No contributions of any kind, including the $1,000 seed, can be made before July 4, 2026, regardless of when the form was filed.
Funding the Account
The aggregate annual contribution limit is $5,000 (2026–2027), and contributions must be made by December 31st each year. The $1,000 government seed contribution does not count toward this limit. This $5,000 limit applies to the account, not the individual donor. For example, if Grandma contributes $3,000 and Dad contributes $3,000, the account is over the limit. Exceeding it triggers a penalty of 100% of net income attributable to the excess without any de minimis exceptions.
Individual contributions (family, friends, the child) create basis and are returned tax-free upon distribution. Employer contributions under IRC §128 (up to $2,500 annually, excluded from gross income), government contributions, and all earnings carry no basis and are fully taxable upon distribution. Qualified general contributions from governments and 501(c)(3)s also carry no basis but do not count toward the $5,000 limit. Investments are restricted to non-leveraged S&P 500 or similar index funds with fees not exceeding 0.10%. Note that if a fund’s expense ratio rises above that threshold after opening, the account could be disqualified; it is advisable to monitor this ratio periodically.
Gift Tax Considerations
Contributions to a Trump Account do not qualify for the annual gift tax exclusion. Because the child has no present right to the funds, these are considered “future interest gifts”. These types of gifts never qualify for the exclusion regardless of amount. Practically speaking, this means that any private contribution triggers a Form 709 (Gift Tax Return) filing requirement – separate from your regular 1040 – even if no tax is owed and even if the amount is below the annual exclusion threshold. The $1,000 government seed carries no gift tax consequence. These positions are supported by current guidance, though Treasury has not yet issued explicit regulatory guidance. Snyder Cohn will continue to monitor as final guidance is released.
A Note for Business Owners
Employers can directly contribute to the Trump Account of an employee or an employee’s dependent, making an IRC §128 program a meaningful employee benefit and retention tool. Contributions of up to $2,500 per employee annually are excluded from gross income but must be made through a formal written plan meeting non-discrimination and notification requirements. Also note, that any employer contribution is counted toward the $5,000 maximum contribution limit.
As you can see, there are many complications and restrictions surrounding Trump Accounts. Be sure to consider all these factors when determining whether to open an account for your child. While 529 plans remain the gold standard for tax-free education savings, Trump Accounts offer a unique, long-term path to retirement by eventually transitioning into a traditional IRA. Snyder Cohn is here to help your family navigate these complexities, including how a Trump Account might fit alongside a 529 plan or other savings vehicles for your family.
By: Zane Sanchez
