December 2025
Traditional IRAs were authorized by the Employee Retirement Income Security Act (ERISA) of 1974. Trump Accounts are a second type of traditional IRA and were authorized by the One, Big, Beautiful Bill Act (OBBBA) in 2025. Both of these types of IRAs have contribution and distribution rules which are different. However, there are some rules which apply to both of these two types of traditional IRAs.
Traditional IRAs are to be primarily used by individuals to save and investment for retirement. Children do not make many traditional IRA contributions because they don’t have the necessary compensation. A Trump Account is a second type of savings and investment account intended to be used by a child in the years after he or she attains the age of 17. Funds withdrawn from a Trump Account may be used for retirement but may be used for many other reasons such investing in a small business, paying for college or special training purposes. Another name for a Trump Account is a Trump IRA.
There are actually two types of Trump Accounts. A regular account and one where the Secretary of the Treasury pursuant to a pilot program will make a $1,000 contribution per enrolled child. In order to make a contribution to a traditional IRA the IRA accountholder must have compensation. In order to make a contribution to a Trump Account there is no requirement for a child to have compensation. So parents, grandparents and others have the ability to contribute to a child’s Trump Account regardless if the child has any income.
A child may only have one Trump Account. This is in contrast to a traditional IRA where a person, including a child may have multiple traditional IRAs.
Although there are some special rules, a Trump Account becomes subject to the general rules applying to a traditional IRA. This happens for all years commencing with the year after the year the child attains age 17.
There are four special rules applying to a Trump Account.
First, a contributor is ineligible to claim a tax deduction for the contribution. Second, a Trump Account has its own rules and limits for contributions. Third, no withdrawal from the Trump Account can occur prior to the year the child attains age 18 unless one of four exceptions applies. Fourth, the funds of a Trump Account can only be invested in certain index investments.
Federal law governing a child establishing a traditional IRA is not as clear as it should be. The child is the IRA accountholder. She or he earned the compensation so the child is the IRA accountholder and the role of a parent or guardian is not discussed. There is no formal responsible individual as there is with Coverdell ESAs.
The rules governing the establishment of a Trump Account are much more defined and there is much more government involvement. A Trump account must initially be created by the Secretary of the Treasury or it agent. An authorized individual may elect to have a Trump Account established for the benefit of an eligible child on IRS Form 4547 or by using an IRS approved on-line tool. The authorized individual who made the election will be the responsible individual for the initial Trump account for that child. A Trump account must be expressly designated as a Trump Account.
A child may have both a Trump Account (no compensation needed) and a traditional IRA if she or he has earned qualifying compensation. However, these two IRAs must be kept separate as long as the child has not reached the year he or she attains age 18.
Contributions made to a traditional IRA may either be deductible or non-deductible. The IRA custodian/trustee is not required to maintain any records regarding whether a contribution was deductible or not. A non-deductible contribution is basis and when withdrawn is not taxable. The traditional IRA accountholder must maintain records on his or her basis by completing Form 8606.
In contrast contributions made to a child’s Trump Account by a parent grandparent or the child are always non-deductible. The Trump Account custodian/trustee must maintain records of the basis of a child’s Trump Account and this information will be set forth on an IRS reporting form for both the IRS and the account beneficiary.
There are different contribution limits applying to a traditional IRA and a Trump Account. A child may have both a Trump Account and a traditional IRA to which contributions are made. Obviously a Trump Account contribution cannot be made to a traditional IRA and a traditional IRA cannot be made to a Trump Account.
A person younger than age 50 as of December 31, 2026 is able to contribute to a traditional IRA the lesser of $7,500 or 100% of his or her compensation. A person age 50 or older as of December 31, 2026 is able to contribute the lesser of $8,600 or 100% of her or his compensation. These dollar limits in future year will increase because there is a cost of living adjustment. The deadline to make and establish a contribution is generally the person’s tax filing deadline which normally is April 15 of the following year without regard to a tax extension. The deadline my change on account of certain holidays or declared disasters.
An annual aggregate contribution limit of $5,000 applies to a child’s Trump Account for 2026 and 2027. Thereafter it will be adjusted for cost of living adjustments.
Exempt contributions are not subject to this $5,000 limit or any limit. Exempt contributions are qualified rollover contributions, pilot program contributions and qualified general contributions.
An employer may contribute up to $2500 into the Trump Account of an employee or any dependent as long as the employer has a formal written Trump Account contribution program. This $2500 limit will be increased by a COLA starting after 2027. The employer’s contribution is excluded from the employee’s income. This limit is per employee and it is not per dependent. This $2500 will count towards the $5000 limit. The employer’s contribution is not to be treated as basis by the custodian/trustee. An employer has the duty to expressly indicate to the custodian/trustee that its contribution is a section 128 contribution and is excludible from the employee’s gross income. The trustee may rely on the employer’s certification.
July 5, 2026 is the first day a contribution may be made to a Trump Account for tax year 2026. An annual contribution for 2026 may generally be made to the traditional IRA from January 1, 2026 through April 15, 2027. This deadline is not changed because the taxpayer has a tax extension. The deadline may be changed in certain disaster situations. Note a traditional IRA contribution may be made during the carryback period. The Trump rules do not permit a carryback contribution. The contribution deadline for a Trump Account for 2026 is December 31, 2026.
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