Welcome to the eighth and final installment in TRP Sumner PLLC’s series of articles exploring key components of the One Big Beautiful Bill (OBBBA), enacted in 2025. Our goal has been to provide clear, actionable insights into the provisions of this comprehensive tax legislation that impact our clients. In this concluding article, we introduce the new Trump Accounts, a savings vehicle designed to support families in building wealth for their children’s future, particularly for milestones like home purchases or education.

Trump Accounts: A New Savings Vehicle for Families

The OBBBA introduces Trump Accounts, a tax-advantaged savings program available beginning July 4, 2026. These accounts provide families with a tool to build long-term savings for their children, offering a one-time $1,000 government contribution for children born between January 1, 2025, and December 31, 2028. Trump Accounts feature tax-deferred growth, contribution opportunities from family and employers, and favorable tax treatment for qualified withdrawals.

Overview of Trump Accounts

• Eligibility: Available to any U.S. citizen child under age 18 with a Social Security number. If parents do not open an account, the Treasury will automatically establish one for eligible newborns.
• Government Seed Money: Children born between 2025 and 2028 receive a one-time $1,000 deposit government deposit, separate from annual contribution limits.
• Contribution Limits: Parents, relatives, or employers may contribute up to $5,000 annually, with employer contributions capped at $2,500. Limits will adjust for inflation beginning in 2027.
• Investment Options: Funds are invested in a low-cost U.S. stock index fund until age 18, when the account converts to a traditional IRA with broader investment choices.
• Tax Treatment: Earnings grow tax-deferred. Qualified withdrawals for education or a first-time home purchase are taxed at long-term capital gains rates. Non-qualified withdrawals are taxed as ordinary income and may incur a 10% penalty if taken before age 59½.
• Access Restrictions: Funds cannot be withdrawn until age 18. After that, withdrawals may be used for education or up to $10,000 for a first-time home purchase without penalty.

Benefits for Families

• Government Contribution: The $1,000 seed deposit for eligible children provides an immediate boost that can grow significantly over time.
• Tax-Advantaged Growth: Savings compound tax-deferred, allowing balances to grow faster than in taxable accounts.
• Flexibility: Accounts may be used for major milestones such as higher education or home purchases.
• Employer Support: Employer contributions up to $2,500 annually can accelerate account growth.

Using Trump Accounts

Trump Accounts are particularly suited for two major goals:

• First-Time Home Purchases: Up to $10,000 may be withdrawn penalty-free for a down payment, taxed at favorable capital gains rates.
• Higher Education: Withdrawals for tuition, fees, and other qualified education expenses are penalty-free after age 18 and taxed at capital gains rates.

Regular contributions can create significant savings. For example, annual contributions of $5,000 from birth to age 18 at a 6% return could grow to more than $150,000, providing substantial resources for education or a home purchase.

Comparison to Other Savings Vehicles

• 529 Plans: Offer tax-free withdrawals for education and higher contribution limits, but less flexibility for non-education uses.
• Custodial Accounts (UTMA/UGMA): Provide investment flexibility and no withdrawal restrictions but lack tax-deferred growth and government seed money.
• Roth IRAs for Kids: Available only with earned income, unlike Trump Accounts, which do not require income to open.

For children born between 2025 and 2028, the $1,000 seed money makes Trump Accounts especially compelling, though families may still want to use them alongside 529 plans or custodial accounts.

Key Considerations

• Limited Seed Money Window: The $1,000 government contribution only applies to children born from 2025 through 2028.
• Tax Rules: Non-qualified withdrawals face ordinary income tax and potential penalties.
• Financial Aid Impact: Trump Accounts may be treated as a student-owned asset for FAFSA, potentially reducing aid eligibility.
• Administrative Steps: Parents should ensure their child has a Social Security number and maintain records to secure the seed contribution.

Planning Opportunities

• Open Accounts Early: Secure the $1,000 seed money and maximize growth time by opening accounts soon after a child’s birth.
• Leverage Employer Contributions: Take advantage of employer participation where available.
• Coordinate with Other Accounts: Use Trump Accounts alongside 529 plans and custodial accounts to balance education and long-term savings goals.
• Stay Informed: Monitor IRS guidance and rules ahead of the program’s July 2026 launch.

TRP Sumner Can Help

At TRP Sumner PLLC, we’re here to help families evaluate Trump Accounts and integrate them into broader financial planning strategies. If you’d like assistance setting up an account or coordinating it with other savings vehicles, our team is ready to guide you. This concludes our OBBB series, and we hope these articles have provided valuable insights into this landmark legislation.