Trump Accounts in 2026: What Parents Should Know
Trump Accounts are new child savings accounts with a possible $1,000 federal pilot contribution, federal tax-deferred growth, and an important California tax difference.
30-second answer
Who this is most relevant for: California families with a newborn or young child, business owners weighing an employer contribution, and higher-income families comparing this account to a 529 plan or custodial Roth IRA.
- Account eligibility: child under 18 for the election year, with a valid Social Security number.
- $1,000 pilot: generally for an eligible U.S. citizen child born in 2025, 2026, 2027, or 2028, if the election is made.
- Setup and funding: use IRS Form 4547; regular contributions generally start after July 4, 2026.
- Benefit and caution: federal tax-deferred growth, but no parent deduction, restricted withdrawals, and annual California tax on earnings.
Accurate as of July 30, 2026. These rules rest on proposed regulations issued in 2026 and may be refined before they are finalized. California may also issue further guidance.
The planning question is not simply whether your child qualifies. It is whether the account fits your family’s tax, education, and long-term savings strategy.
Who qualifies
The IRS describes Trump Accounts as a new type of individual retirement account for children. A child may be eligible for the account if the child has not reached age 18 before the end of the calendar year in which the election is made and has a valid Social Security number.
The $1,000 federal pilot contribution is narrower. It generally applies only to an eligible child who is a U.S. citizen, has a valid Social Security number, is born in 2025, 2026, 2027, or 2028, and has not already had a pilot program election processed.
How to set it up and fund it
IRS Form 4547, Trump Account Election(s), is used to request account establishment and, where applicable, elect the $1,000 pilot contribution. The form is generally filed with the federal income tax return for the year the election is made, and the election is made once per child. The IRS has also opened an online election path through trumpaccounts.gov and IRS Individual Online Account access. Regular contributions generally cannot be made before July 4, 2026.
- Regular annual limit: generally $5,000 per year during the child’s growth period, combined across parents, relatives, friends, the child, employers, and other regular contributors. The $1,000 federal pilot contribution and qualifying rollover contributions are outside that regular annual cap.
- Who can contribute: parents, relatives, friends, the child, employers, and certain other sources may be able to contribute.
- Employer cap: employer contributions are generally limited to $2,500 per year and count toward the $5,000 annual limit.
- Earned income: unlike a regular IRA contribution for a child, Trump Account contributions during the growth period do not require the child to have compensation.
Federal benefits and limits
The main federal benefit is tax-deferred growth. During the growth period, funds generally must be invested in qualifying mutual funds or exchange-traded funds that track a U.S. stock index, such as the S&P 500, do not use leverage, and keep annual fees and expenses at or below 0.1% of the fund balance.
The account should not be sold as a current tax deduction. The Internal Revenue Code says no regular IRA deduction is allowed for contributions made before the first day of the calendar year in which the beneficiary turns 18.
IRS Notice 2025-68 also makes basis tracking important: federal pilot contributions, qualified general contributions, and qualifying employer contributions do not create basis. Other growth-period contributions generally do create basis.
Withdrawals are highly restricted while the child is under 18. After the growth period, the account is generally treated like a traditional IRA, including the usual tax rules and potential early-distribution penalty rules.
California tax treatment
California is the major planning wrinkle. Under Senate Bill 711, the Conformity Act of 2025, California changed its specified Internal Revenue Code conformity date to January 1, 2025. IRC section 530A was enacted later on July 4, 2025, so California does not automatically conform to the federal Trump Account rules.
- $1,000 federal pilot contribution: the FTB has stated it is not treated as California income.
- Annual earnings: California generally taxes account earnings as they accrue during the growth period, even though the federal side is tax-deferred.
- Whose return, and kiddie tax: the account is owned by the child, so California taxable earnings generally belong on the child’s return. If the child has enough unearned income, the kiddie tax rules may also need to be reviewed.
- Employer contributions: amounts excluded from federal wages are generally taxable as California wages because California does not conform to the federal employer-contribution exclusion.
- Recordkeeping: California families should track federal treatment and California tax already paid so the same growth is not taxed twice later.
California Planning Tip
While federal earnings generally grow tax-deferred, California currently taxes annual earnings inside a Trump Account. That difference makes proper recordkeeping essential.
A quick sense of scale. Say a family puts $5,000 into the account and it earns $300 during the year. Federal tax may generally be deferred inside the Trump Account, but California may still treat that $300 as taxable income to the child for that year. The dollar amount may be modest in year one, but the recordkeeping difference matters as the account grows.
When it may fit
A Trump Account may be worth opening when a child qualifies for the $1,000 federal pilot contribution, when the family wants long-term retirement-style compounding, or when an employer benefit makes contributions efficient federally.
It may be less attractive when the goal is education funding, flexible access before adulthood, or a current tax deduction. In those cases, compare it against a 529 plan, a Roth IRA for a child with legitimate earned income, or a custodial brokerage account.
Employer contributions
Employer contributions can be useful, but employers should review plan design, eligibility, nondiscrimination, payroll reporting, employee communication, and California wage treatment before announcing the benefit.
For California employers, the federal exclusion does not automatically mean the contribution is tax-free for every purpose.
Before opening one
- Confirm the child’s age, Social Security number, citizenship status, and pilot-contribution eligibility.
- Separate the free $1,000 decision from the decision to add more family money.
- Compare the account to the real goal: education, retirement-style compounding, financial literacy, or flexibility.
- Document the California layer from the first year.
Trump Accounts can provide valuable long-term savings opportunities, but they are not the right choice for every family, especially in California, where state tax treatment differs from federal law.