Proposed Regulations Issued for Trump Accounts

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Proposed Regulations for Trump Accounts

 

The IRS and Treasury have issued proposed regulations for Trump accounts (also called 530A accounts), the new child savings accounts created by the One Big Beautiful Bill Act (OBBBA) President Donald Trump signed last July. The proposed regulations detail how to open and manage Trump accounts and explain how the program’s one-time $1,000 federal pilot contribution will function.

You can open a Trump account with an election on Form 4547 or electronically. All of our tax clients with children under 18 will have this form automatically filed on their behalf by our tax team. Even though there’s a tax form available to make the election, it’s considered separate from your tax return. You can submit the form when filing your return (as we will be doing for our clients), file it independently, or use the online portal. The election must be made by December 31 of the year when the child turns 17.

Proposed Regulations for Trump Accounts Explained

Ok, I Filled Out Form 4547

Once the IRS processes the first valid election, the process is effectively locked. Only one Trump account per child can be created, and any later elections for the same child will not be processed. Keep in mind that even if you make an election now, you can’t make contributions yet. No contributions of any kind—whether from parents, employers, or the government—can be made before July 4, 2026. That includes the $1,000 pilot contribution from Uncle Sam.

Because the account beneficiary is a minor, someone must act on the child’s behalf to manage the account. The proposed regulations refer to that person as the responsible party. In most cases, the person who opened the account will be the responsible party. That person can select among eligible investments, direct a rollover to another Trump account, arrange certain rollovers to ABLE accounts (Achieving a Better Life Experience accounts designed for individuals with disabilities), and designate a successor responsible party.

Contributions for Trump Accounts

Trump Accounts come with a $5,000 annual contribution limit, adjusted for inflation after 2027. But that limit doesn’t apply to all contributions, The $5,000 cap includes contributions made by employers under a special employer program and to contributions made by individuals such as parents or grandparents. Employer contributions, which are included in the $5,000 cap, can’t exceed $2,500 per year (adjusted for inflation) but are excluded from taxable income.

Other contributions fall outside the $5,000 cap. These include the $1,000 pilot program contribution, qualified general contributions made by governments or charities, and certain rollover contributions. Those amounts do not reduce the $5,000 annual limit available for family or employer contributions.

Because Trump accounts are intended as long-term savings plans, distributions are generally prohibited while the beneficiary is under 18. The only permitted withdrawals during this period are limited to specific circumstances, such as rolling the account into another Trump account, correcting excess contributions, or distributing the account upon the beneficiary’s death. The instructions also allow certain qualified rollovers, including limited rollovers to ABLE accounts once the beneficiary reaches age 17.

Hardship withdrawals are not permitted, and you can’t simply close the account and distribute it because your circumstances have changed. However, once the beneficiary turns 18, most of these restrictions fall away, and the account begins to operate much like a traditional IRA.

Don’t Forget the $1,000 Pilot Program Contribution

So how do I get the $1,000? There’s an interesting twist in how the federal contribution is delivered. Instead of depositing money directly into the account, the rules consider the child as having made a payment toward federal income tax. Once a pilot program election is processed, the child is considered to have made a $1,000 payment toward their federal income tax liability. Since most children have no tax liability, this payment results in a $1,000 overpayment. The IRS then refunds this overpayment directly into the child’s Trump account as the contribution from the pilot program.

These proposed regulations focus primarily on the program’s early mechanics. Additional guidance is expected before the program becomes fully operational. Contact us at (312) 578-9300 or info@madonia.com if you have questions or concerns.