The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4th, 2025. One key change included as part of the bill is the creation of new Trump accounts - a form of Individual Retirement Account (IRA) created to benefit individuals under 18. Eligible individuals can take advantage of the tax-deferred growth to pay for education, a first-home purchase, or starting a business.
How to set up a Trump Account?
- The Trump account pilot program is currently offering a $1,000 contribution for opening an account for children who are born between January 1, 2025, and December 31, 2028, are a U.S. citizen, and have a valid Social Security number.
- Trump accounts can be set up for individuals under the age of 18 starting in July 2026. They can be opened at the bank of your choice, but they must be designated specifically as a Trump account and subsequently invested in mutual funds and indexed ETFs.
- The United States Treasury will also set up these accounts for eligible individuals for which an account has not yet been created.
About your Contributions and Distributions
- Contributions can be made starting July 4, 2026, and are considered post-tax (meaning no tax deduction can be taken in the year of contribution). The maximum annual contribution is $5,000 (adjusted for inflation after 2027) and may begin in the calendar years before the child turns 18.
- Employers can also contribute up to $2,500 towards this maximum, and it will not be included in the employees’ income. Beginning in the calendar year in which the child turns 18, distributions can be made. Qualified distributions will be taxed at long-term capital gains rates, and non-qualified distributions will be taxed at ordinary income rates.
- Early distributions may be at risk of an early-withdrawal penalty (following traditional IRA rules).
Ultimately, there are still several details surrounding Trump accounts that have yet to be disclosed, and it is important to stay connected with your accountants and financial advisors to see how this opportunity might impact you.
If you have any questions about the opportunities listed above, or if you would like to schedule an appointment to understand the impact of these changes on your situation, please do not hesitate to contact our team. Appointments can be scheduled online by visiting our homepage at www.ongandcompany.com.