Trump Accounts: An “IRA” for Minors
The "Trump Accounts" in the One Big Beautiful Bill Act
On July 4, 2025, the "One Big Beautiful Bill Act" was signed into law, introducing several impactful programs. Among them, Section 70204 details an innovative initiative known as the Trump Accounts and Contribution Pilot Program, a bold step toward incentivizing long-term financial security for children and families. Let’s break down what this section entails and how it empowers Americans, particularly young individuals, to build wealth and financial stability.
What are Trump Accounts?
Trump Accounts are individual retirement accounts (IRAs) specifically designed for minors under the age of 18. These accounts mirror traditional IRAs but with unique rules and benefits to promote early savings and wealth accumulation. They are organized and managed by the U.S. Treasury, ensuring accessibility and standardization across the program.
Key features include:
Exclusivity for minors under 18 years old.
Contribution limits of $5,000 per year (adjusted for inflation starting in 2027).
Restriction to "eligible investments" like low-fee mutual funds or ETFs that track broad U.S. stock indexes.
No distributions allowed until the account beneficiary turns 18 (with certain exceptions).
How Do Trump Accounts Work?
Parents or guardians, as well as the government, can contribute to these accounts. Contributions can come in various forms:
Qualified Contributions: These are standard contributions made to the account by parents, guardians, or others (up to the annual cap).
Government Contributions: Under a new pilot program, eligible children born between 2025 and 2028 receive a $1,000 contribution from the federal government into their Trump Account if they meet specific criteria.
Employer Contributions: Employers can contribute up to $2,500 annually to Trump Accounts for employees' dependents, incentivizing family-focused benefits.
Investment and Growth
Funds in Trump Accounts are limited to eligible investments, such as ETFs or mutual funds tied to major U.S. indices like the S&P 500. These investments ensure long-term growth with minimal fees and avoid risky, leveraged products.
Tax Benefits
Contributions to Trump Accounts are not tax-deductible, but the accounts benefit from tax-deferred growth. Additionally:
Government contributions and certain rollovers are excluded from taxable income.
Qualified distributions, such as rollovers to ABLE accounts (accounts for individuals with disabilities), are tax-exempt.
Safeguards and Penalties
The program includes strict safeguards to ensure compliance:
Contributions above the annual cap are subject to penalties.
Fraudulent claims for government-funded contributions may incur fines of $500 to $1,000.
Trustees managing Trump Accounts must report contributions, investments, and distributions to the IRS to maintain transparency.
The Trump Accounts Contribution Pilot Program
A noteworthy feature is the pilot program for children born between 2025 and 2028. Parents can elect to have the government contribute $1,000 directly to their child’s Trump Account. This initiative aims to kickstart wealth-building for a new generation, encouraging financial responsibility from an early age.
Employer Incentives
Employers are encouraged to offer Trump Account contributions as part of their benefits packages. Up to $2,500 in employer contributions per year can be excluded from employees’ taxable income, providing an incentive for businesses to support family savings.
Funding and Administration
To ensure the program’s success, $410 million has been allocated to the Department of the Treasury to administer the accounts and pilot program until 2034. This funding underscores the government’s commitment to making this initiative accessible and effective.
Key Highlights of Trump Accounts and Contribution Pilot Program
Purpose and Target Audience
Designed exclusively for minors under 18.
Aims to promote early financial investments and long-term wealth building.
Account Features
Mirrors traditional IRAs but with unique rules.
Contribution limit: $5,000 annually, adjusted for inflation from 2027.
Investments restricted to low-cost, index-tracking ETFs and mutual funds.
Contributions
Qualified Contributions: Standard contributions by parents or guardians.
Government Contributions: $1,000 provided to eligible children born between 2025-2028.
Employer Contributions: Employers can contribute up to $2,500 per dependent, excluded from taxable income.
Investment Rules
Limited to "eligible investments" (broad market index funds).
No high-risk or leveraged investments allowed.
Distribution Rules
Funds cannot be withdrawn before age 18, with exceptions for rollovers to ABLE accounts or correction of excess contributions.
Tax Treatment
Contributions are not tax-deductible, but growth is tax-deferred.
Government contributions and qualified rollovers are excluded from taxable income.
Penalties and Safeguards
Excess contributions face a 100% penalty on income earned from the excess.
Fraudulent claims for government-funded contributions incur penalties of $500 to $1,000.
Pilot Program for 2025-2028 Births
Offers a $1,000 government contribution for children born within this period.
Parents or guardians must provide valid Social Security numbers to qualify.
Employer Incentives
Encourages employers to offer family-focused benefits by contributing to Trump Accounts.
Employer contributions up to $2,500 per year are excluded from employee taxable income.
Administrative Oversight
The U.S. Treasury oversees the program and selects trustees based on reliability, cost, and customer service.
$410 million in funding allocated to administer the program through 2034.
Inflation Adjustments
Contribution limits and employer incentives are adjusted for inflation starting in 2027.
Transparency and Reporting
Trustees must report contributions, distributions, and account values to the IRS.
Government contributions and rollovers are subject to strict reporting requirements.
This landmark initiative represents a forward-thinking approach to financial security, offering families and children a head start on wealth accumulation and economic empowerment. Whether through government contributions or employer participation, Trump Accounts set the stage for a financially secure future.