Understanding Trump Accounts: What Tax Preparers Need to Know in 2025

New IRC § 530A establishes savings accounts for children

One of the many changes brought about with the signing July 4, 2025 of the One Big Beautiful Bill Act (OBBBA), is the creation of the Trump Savings Account. Trump Accounts are special savings accounts created by the federal government for every child born between January 1, 2025, and December 31, 2028.

The OBBA added IRC § 530A, which outlines eligibility and rules for Trump Accounts. This section also references existing IRC § 408(a) (traditional IRA rules).

Tax professionals should understand these accounts so they can advise clients on the tax implications and how to plan for them. While the concept is simple, the tax implications are nuanced and require careful planning.

Let’s look at a few of the details.

U.S. citizen children born between January 1, 2025, and December 31, 2028, who have a valid, work-eligible Social Security number, qualify for a Trump Account, and will receive the one-time $1,000 federal contribution. If parents don’t voluntarily open a Trump Account for an eligible child, the Treasury is directed to do so automatically. Once the account is established (whether by parents or automatically by the government), the $1,000 deposit will be placed into the account automatically.

Eligible children will be identified based on tax filings that list the child as a dependent.   

Here’s a breakdown of the rules:

  • Account holder eligibility
    • Must be under age 18 in the year the account is established
    • Must have a Social Security number
    • Account can be set up by a parent or guardian
  • Contribution rules
    • Up to $5,000 per child per year (non-deductible)
    • Employer contributions (up to $2,500 per year) are also allowed and are not taxable to the employee
    • Contributions must be made by December 31 of the applicable year
    • Indexed for inflation starting in 2028
    • Treasury will provide a one-time $1,000 contribution for eligible account holders. (Ends January 1, 2029.)


Tax Implications for Clients

The Trump Accounts function similarly to retirement accounts like IRAs or 401(k)s. Gains are not taxed annually, allowing for compounding growth. Taxes are only due upon withdrawal, which can significantly reduce the tax burden due to the time value of money.

Withdrawals used for qualified expenses (such as education, home purchase, business startup) are taxed as capital gains, which are often lower than ordinary income tax rates. For example, in 2025, single taxpayers earning less than $48,350 pay 0% capital gains tax, meaning many 18-year-olds may owe no tax at all on their withdrawals.

Planning for Withdrawals

Tax preparers should advise clients to:

  • Track the intended use of the funds to ensure favorable tax treatment.
  • Consider income thresholds for capital gains tax exemptions.
  • Plan for documentation to prove qualified use of funds.

Additional Considerations

  • Impact on FAFSA and Financial Aid: These accounts may affect a student’s financial aid eligibility. Preparers should help families understand how to report these assets.
  • State Tax Treatment: While federal rules are clear, state tax treatment may vary. Stay updated on your state’s position.
  • Estate Planning: These accounts could be integrated into broader financial strategies, especially for families with multiple children.

Counseling Clients Effectively

Tax preparers should:

  • Educate clients early—especially new parents—about eligibility and benefits.
  • Monitor legislative updates, as rules may evolve.
  • Coordinate with financial advisors to align investment strategies with tax planning.

Conclusion

The Trump Accounts represent a significant opportunity for long-term financial growth with favorable tax treatment. The Trump administration projects that accounts for which maximum contributions are made could reach $300,000 in value by age 18.

Implementation rules are still being finalized, so it’s wise to stay tuned for official guidance from the Treasury and IRS, which will clarify any required actions or opt-out procedures.

By understanding the nuances and proactively advising clients, tax preparers can help families maximize this benefit and avoid costly mistakes.

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