Tax Strategy: Preparing for Trump account contributions

In Information Release 2026-42, dated March 31, 2026, the Internal Revenue Service announced that it has processed the 2026 tax filing season Form 4547, "Trump Account Election," for more than 4 million children (each form can accommodate up to two children) and Part III of the form indicated that more than 1 million children were eligible for the $1,000 government contribution.

That number is expected to grow as the tax season progresses and as additional children are born between now and 2028, after which the $1,000 contribution currently ends. Clearly, taxpayers are looking at Trump accounts even beyond the $1,000 government contribution.

The Joint Committee on Taxation had projected the cost of Trump accounts enacted in the One Big Beautiful Bill Act last year at around $15 billion through 2034, with more than 95% of the amount due to the $1,000 federal government contribution. This would tend to imply that something like 15 million children were considered potentially eligible to receive the $1,000 federal contribution. Assuming steady birth rates over the 2025-to-2028 years of eligibility, one could estimate that around 3,750,000 of those children should have been born in 2025. Therefore, the current 1 million number has the potential to grow as the filing season winds down and as additional Form 4547s are filed separate from tax returns.

Basic Trump account requirements

What is perhaps most attractive about the Trump Accounts is the $1,000 government contribution. The contribution is available for children born from 2025 to 2028 who are U.S. citizens, have a valid Social Security number, and have a proper request made. However, a Trump account can be opened for any child under the age of 18 with a valid Social Security number. Up to $5,000 per year (adjusted for inflation after 2027) can be contributed per year until age 18. The contributions can come from parents, relatives, friends, employers, government entities, or charitable or philanthropic organizations. No contributions can be made until July 4, 2026. Although children born in 2025 are eligible for the $1,000 government contribution, it does not appear that a $5,000 contribution can be made with respect to the 2025 calendar year.

Investments by Trump accounts are limited to low-cost mutual funds or exchange traded funds with expense ratios capped at 0.1% (or 10 basis points) and that track a broad U.S. equity index such as the S&P 500. Although set up initially with the government, Trump accounts may be transferred to an eligible private trustee after July 4, 2026, when contributions are first allowed.

Until age 18, withdrawals are only permitted for eligible rollovers, excess contribution distributions, or distributions upon death on the beneficiary. At age 18, the Trump account automatically converts to a pre-tax IRA.

Employer funding

Employers are permitted to contribute up to $2,500 per employee (adjusted for inflation after 2027) annually to Trump accounts of their employees or their dependents. Employers wishing to participate are required to adopt a written Trump account contribution program, or TACP. The plan may permit the employer to make contributions directly to a Trump account or may allow the employee to make pre-tax contributions to a dependent's Trump account under the employer's Code Sec. 125 cafeteria plan.

The IRS has yet to issue guidance for TACP requirements, such as discrimination rules. The plans are expected to be similar to plans for dependent care flexible spending accounts or dependent care assistance programs.

The Congressional Research Service and Government Accountability Office estimate that around one-third to one-half of larger employers (variously defined as greater than 100 or greater than 500 employees) currently offer DCFSAs or DCAPs. Less than 15% of small employers offer DCFSAs or DCAPs. Employers that already offer DCFSAs or DCAPs may be more likely to consider making employer contributions to Trump accounts. The Bureau of Labor Statistics estimates that around 30-40% of private sector workers have access to DCFSAs or DCAPs.

The employer contributions to Trump accounts are excluded from an employee's gross income but do count toward the $5,000 annual contribution limit. The employer contributions would be coded as TA in Box 12 of Form W-2.

A few large corporations, such as Black Rock, JP Morgan Chase, and Bank of America, have already announced plans to set up TACPs. Employees with qualifying children may wish to consider asking their employers if they intend to set up a TACP.

Michael and Susan Dell

Computer mogul Michael Dell and his wife Susan have committed $6.25 billion to fund $250 contributions to the Trump accounts of the first 25 million children under age 10 living in U.S. zip codes with a median income below $150,000 and who are not eligible for the $1,000 federal contribution. Well over 90% of all ZIP codes in the U.S. have median family incomes under $150,000, including most rural areas, urban city centers, and even many suburban areas.

With the Census Bureau estimating that around 47 million children under age 10 live in the U.S., the Dell $250 contribution would cover about half of those children. Parents of children not eligible for the $1,000 federal government contribution and not in wealthier ZIP codes may want to consider setting up Trump accounts as soon as possible to qualify for the Dell contribution as well as other possible contributions.

Treasury 50-state challenge

The U.S. Department of the Treasury is promoting a 50-state challenge to encourage other wealthy individuals to emulate the Dell commitment in each of the 50 states. Ray and Barbara Dalio have committed $75 million for $250 contributions to children in the State of Connecticut who meet requirements similar to the Dell requirements. 

Although some other names of wealthy individuals have been named as considering similar contributions, no other firm commitments have yet been announced. Also, no state governments have yet announced contribution programs for their states. San Francisco has announced a donor fund for contributions to Trump accounts for city residents. Many children will qualify for a $250 contribution to a Trump account from these commitments already announced.

Summary

Whether with a $1,000 federal government contribution, a $250 private contribution, or even no contribution other than from parents, Trump accounts should be attractive. Unlike IRAs which have earned income requirements, Trump accounts can qualify for maximum contributions from birth. Taxpayers should act to file Form 4547 for their children under age 18. Early filing gets the child in the database for existing contributions from other sources and additional contributions as they are announced.

Some details still await further guidance. Taxpayers may want to delay transferring the Trump accounts to a private investment advisor until that additional guidance is issued. Those private investment advisors may want that guidance before starting to accept Trump Accounts. Details are still needed on the required content of a TACP, whether Trump Accounts are considered an ERISA plan, how the accounts will be monitored and enforced, and how non-discrimination requirements will be tested.