“Trump Accounts” in the One Big Beautiful Bill

This article is one in a series on the One Big Beautiful Bill Act (OBBB) that was signed into law in July 2025. The bill represents the most significant tax legislation since the Tax Cuts and Jobs Act (TCJA) that became law in 2017. As we work to digest all of the details contained in the massive 1,100-page bill, we will post additional articles here.

OBBB creates individual retirement accounts for minors called “Trump accounts.” The legislation includes a pilot program where the government will contribute $1,000 to this account for each child with a valid Social Security number born between 12/01/2025 and 12/31/2028.

The earnings will grow tax-deferred. Each year, the account may receive up to $5,000 in contributions. Those contributions are not tax deductible by the donor. The $5,000 contribution limit will be increased annually for inflation. Contributions made by the government or made by a nonprofit entity to a qualified class of beneficiaries are excluded from the annual contribution limit.

Employers can contribute up to $2,500 to the Trump accounts of employees’ children, but those contributions do count toward the annual contribution limit. The $2,500 is not included in the employee’s gross income, so it is not subject to tax at either the employer or employee level. (This is similar to the way other fringe benefits are treated for tax purposes.)

The accounts require the funds be invested in a stock index fund. No distributions may be made before the child turns 18. Withdrawals are subject to income tax. Starting at age 18, the beneficiary can use the funds for college tuition (unlimited) or for a first-time home purchase (up to $10,000). If funds remain in the account not used for one of the specifically allowed uses, general withdrawals can be made, subject to a 10% penalty if withdrawn before the beneficiary reaches age 59 ½.

Schreiber Accounting and Advisory is constantly monitoring tax legislation changes, and stands ready to help clients take advantage of opportunities for tax savings when they present. Check out the firm’s Tax Preparation and Planning services, and contact the firm for more information.

Material discussed is for informational purposes only. It is not to be interpreted as investment, tax, or legal advice. Individual situations vary, and this information should only be relied upon when coordinated with individual professional advice.