Trump Accounts
The GOP’s One Big Beautiful Bill, or OBBB, introduced a new tax-preferred savings vehicle for children. These so-called Trump accounts can be established for any minor under the age of 18. The federal government will provide a $1,000 initial contribution for newborn-beneficiaries. Parents can contribute up to $5,000 annually and employers can contribute up to $2,500 annually (the $2,500 employer-side contribution will not be included in the employee-parent’s taxable income). Contributions to Trump accounts will be permitted beginning July 4, 2026 and distributions will be permitted only once the account beneficiary has reached age 18 (for any purpose). Distributions attributable to actual principal contributions are tax-free and earnings are taxed at ordinary income tax rates.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about the potential impact of the newly-introduced Trump Accounts.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Their Reasons:
Byrnes: These Trump accounts will provide a powerful tax-preferred savings tool to give children in this country a head start when it comes to savings. Trump accounts can be used for education, first home purchases and even for starting a business—giving all American children a head start on life, regardless of their family’s economic standing, in a way that has not been previously available under the tax code.
Bloink: The idea of a tax-advantaged savings account that's initially funded by the federal government for child beneficiaries is positive, of course, but I don't see why we need yet another type of tax- advantaged savings plan. If the federal government wants to actually contribute and provide the seed money for these accounts, it seems that it would be much simpler to simply contribute to an existing type of tax-advantaged savings vehicle--such as a 529 plan, health savings vehicle or even a Roth account.
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Byrnes: Trump accounts are an incredibly unique and valuable way to save on a tax-advantaged basis for whatever needs a child may encounter upon reaching adulthood. Yes, we have a range of existing tax-preferred accounts that are taxed in very similar ways, so we’re really just building upon an existing set of tax rules. It’s the permitted use of the funds—and the overall purpose of allowing all taxpayers to participate in the capital markets from a young age—that will make these Trump accounts a success.
Bloink: Yes, the potential value is there, but the details are off. By permitting the employer-side contribution, Trump accounts could become a powerful employment benefit if executed smartly. The law allows employers to contribute to these accounts on behalf of employees’ children without the contributions being treated as taxable income--yet pre-tax payroll contributions on the employee's behalf are not permitted to encourage the parent themselves to continue funding the account year after year.
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Byrnes: One of the primary benefits of these Trump accounts is that going forward, each and every child with a Trump account will have an opportunity to participate in the investment markets and gain the benefit of compound growth. When Americans are invested in the success of the stock market because their own dollars are invested, they become invested in the success of American businesses and the economy as a whole.
Bloink: While the concept is strong, the rules that we currently have seem overly complicated. I do think that we’re going to see parents who initially establish these accounts to gain the value of the government's initial $1,000 contribution. That said, I don't see these accounts gaining significant traction to become the powerful savings vehicle that they could become as the provisions are drafted. Perhaps the IRS will step in and provide valuable guidance and certainty going forward.