IRS Issues Trump Account Guidance

The notice provides an overview of how Trump accounts work and addresses “certain initial questions about creating initial and rollover Trump Accounts, the $1,000 pilot program contribution, other contributions — including qualified general contributions and section 128 employer contributions — eligible investments, distributions, reporting, and coordination with the rules applicable to other types of IRAs," the IRS said in a statement.

Parents or other authorized individuals wanting to set up a Trump account for an eligible child “will soon be able to apply to do so on a forthcoming IRS Form 4547 (commemorating Mr. Trump’s service as both the 45^th and 47^th U.S. president) or on a website at trumpaccounts.gov,” said Iwry, now a nonresident senior fellow at the Brookings Institution in Washington.

More information is coming on Dec. 17, according to the website.

The guidance also “makes clear that financial institutions can serve as trustees of a Trump account if they are a bank or an IRS-approved nonbank Trump account trustee,” Iwry said. “This automatically includes any institution that IRS has already approved (or will approve by 2025 year-end) to serve as a nonbank trustee of a traditional IRA. Trump accounts are traditional (not Roth) IRAs, but are subject to additional, special rules specific to Trump accounts.”

The notice also explains "how a 'rollover Trump account' can be set up and funded — only through a trustee-to-trustee transfer of the entire balance — which the statute may not explicitly specify," added Jeff Bush of The Washington Update.  

Also defined are “eligible investments,” Bush said, which are limited to "low-fee, non-leveraged U.S.-focused funds or ETFs. The statute provided the general concept, but the Notice offers concrete guidance."

The biggest takeaway “from a planning perspective is that it appears that Roth conversions of Trump accounts WILL be allowed starting in the year that the account beneficiary turns 18,” Ben Henry-Moreland, senior financial planning nerd at Kitces.com, said in a LinkedIn post. “That definitely makes Trump accounts more interesting tax-planning wise, as you get the potential for many decades of tax-free growth for someone who converts the account to Roth in early adulthood.”

Details on Trump Accounts

The funds in Trump accounts, officially known as Invest America accounts, must be invested in certain mutual funds or exchange-traded funds that track the S&P 500 or another index of primarily American equities, the IRS explained.

Trump Accounts are "a new early-start IRA-like savings plan for children that, importantly, does not require earned income to participate," said Bush of The Washington Update on Tuesday in an email.

As the guidance states, parents, guardians and employers can contribute up to $5,000 each year, with tax-free growth and tax-free withdrawals for education, a first home or starting a business.

Every child born between 2025 and 2028 will automatically receive a $1,000 federal seed contribution, and there are no income limits for contributors.

“More administrative details will follow" from the IRS, Bush pointed out.

Trump Accounts are effective beginning in 2026, with contributions permitted starting July 4, 2026.

Earlier on Tuesday, Michael and Susan Dell pledged $6.25 billion to contribute $250 deposits into 25 million new Trump accounts for children ages 10 and younger.

The Dells’ “goal is to give millions of younger children a substantial early start and maximize long-term compounding,” Bush noted. “Perhaps, this will set a trend in philanthropy."

However, Bush questioned whether "an additional savings program is necessary. My concern is that the many savings options could confuse typical savers, and we know people won’t act if they aren’t sure."

That said, "wealthy families will take advantage of these accounts, giving their children a strong start towards a comfortable retirement," Bush said.

"There are several things the notice does not accomplish," Bush continued. "It does not finalize regulations, address state law issues, or cover other non-tax legal matters outside the service's [IRS'] authority. Nor does it establish Trustee-approval procedures, sample account-governing documents, or final forms. These are expected by July 4, 2026."

Labor 'Playing Catch Up'

The Labor Department's Employee Benefits Security Administration, “largely deprived of key staff during the shutdown, is now playing catch up to coordinate with Treasury and IRS on the ERISA (Employee Retirement Income Security Act) issues raised by these IRA-like Trump accounts,” Iwry of Brookings added.

"Contributions to IRAs normally are made by individuals, not employers. Individuals who are employees can elect (whether affirmatively or by auto enrollment) a convenient way to make IRA contributions by using payroll deduction, as a million workers are already doing in state-facilitated automatic IRA programs," Iwry said. "Those are exempt from ERISA. But if an employer made its own tax-favored contributions to IRAs owned by its employees, as the new tax code section 128 permits, that would normally be viewed as triggering potential ERISA coverage of the IRA."

The new IRS notice "promises future guidance from Labor and Treasury on how employers can avoid ERISA while contributing to Trump accounts,” Iwry added.

Credit: Chris Nicholls/Touchpoint Markets; Adobe Stock