IRS issues new Trump Account Rules

[James48843]

If you haven’t heard, the IRS just issued new rules for the upcoming “Trump Account” IRA’s for children, starting in 2026.

Basically, ANY child under Age 18 can have an account established, and will get money from the federal government to START a IRA style savings plan. The IRS rule says $1000 federal contribution the first year. The kicker is that it has to be invested in a qualified index fund, AND, at age 18 it becomes an IRA type retirement account, that they can’t withdraw until old age. Well, there is more to it. It’s part of a bill passed earlier.

Here is the IRS write up about the program.

Treasury, IRS issue guidance on Trump Accounts established under the Working Families Tax Cuts; notice announces upcoming regulations | Internal Revenue Service

IR-2025-117, Dec. 2, 2025 — The Department of the Treasury and the Internal Revenue Service today issued a notice announcing upcoming regulations and providing guidance regarding Trump Accounts, which are a new type of individual retirement account for eligible children.

www.irs.gov

 

[evilanne]

Note: The federal contribution is for only children born in 2025-2028 (My great niece & nephew don't qualify)

Landmark Dell Gift Supercharges Trump Accounts for America’s Kids

Today, President Donald J. Trump joined top lawmakers and philanthropists Michael and Susan Dell to celebrate an extraordinary milestone for Trump

www.whitehouse.gov

Seems like it will be complicated as the contributions would be after tax (you would need to track the contributions) but if it is treated as a regular IRA then you could avoid 10% penalty for qualified education expense but it would be subject to federal/state income taxes but at child's lower tax rate and a portion of withdrawal should be tax free (contribution proportion)

 

[JTH]

Pardon my take, at face value it seems like an interesting idea. So the parents, with earned income can contribute to the account, meaning your retired grandparents can't. I'm thinking back to when I was a father of 3, working 2 jobs, and not much of a penny to my name.

This does nothing to help lower income people who have no income. If anything, in 20 years it's going to separate the middle class gap even further. I can see it now, a bunch of 20 somethings complaining their parents never did shi!t for them. Well, that's happening already...

Roughly speaking, some kids at 18 will have a 100K head start, and others won't.

 

[WorkFE]

Roughly speaking, some kids at 18 will have a 100K head start, and others won't.

Most likely those kids already have a 100K head start without those accounts.

 

[evilanne]

I don't see anything that says contributions have to come from earned income except at age 18 it becomes like an IRA and they can continue to contribute under IRA rules

 

[JTH]

I don't see anything that says contributions have to come from earned income except at age 18 it becomes like an IRA and they can continue to contribute under IRA rules

Correct, we haven't seen the regs yet, this guidance mostly just references other existing documents like the 203 IRA contribution limits.
Having skimmed that 44-Page Doc, it seems a mess, with a lot of purse strings attached to that 1K and the proper designation of a Trump Account.

GPT estimated about 14.5 Million births during this window, while in the real world less than 20% fully fund their own accounts. It's possible that only the top 20% of income earners will utilize this program. I like the idea, until you get to the part where you use my tax money for seeding these accounts, it's not their money.

 

[nasa1974]

Correct, we haven't seen the regs yet, this guidance mostly just references other existing documents like the 203 IRA contribution limits.
Having skimmed that 44-Page Doc, it seems a mess, with a lot of purse strings attached to that 1K and the proper designation of a Trump Account.

GPT estimated about 14.5 Million births during this window, while in the real world less than 20% fully fund their own accounts. It's possible that only the top 20% of income earners will utilize this program. I like the idea, until you get to the part where you use my tax money for seeding these accounts, it's not their money.

I haven't read the document, but I definitely don't like the "my tax money" part.

 

[SteelSaving]

I had a similar idea in my head a few years ago as this Trump account.
One main difference is whatever the government puts in it needs to be paid back before the money in the account can be accessed.

From 0-18 it's 0%. At 18 and beyond, interest compounds at the fed rate.

This is only on the government funded portion. Not on earnings or any contribution from the family.