Starting July 4, the new Trump Account lets parents and grandparents contribute up to $5,000 a year into a tax-deferred investment account for any child under 18. The money goes into a low-fee U.S. stock index fund — no bonds, no individual picks — and stays locked until the child turns 18, when the account converts to a traditional IRA. Children born between 2025 and 2028 also get a one-time $1,000 from the federal government.
If you own a business, there’s an angle worth paying attention to. Employers can contribute up to $2,500 per employee per year — total, not per child — toward their children’s Trump Accounts, and that contribution is a deductible business expense that’s excluded from the employee’s income. It’s a real benefit you can offer your team, and it works for your own kids too. The employer contribution counts toward the $5,000 annual cap, but the tax treatment makes it more efficient than personal contributions dollar-for-dollar.
Here’s where it gets tricky for wealthier families. Personal contributions to a Trump Account don’t qualify for the annual gift tax exclusion — currently $19,000 per donor, per recipient. Because the child can’t touch the money until 18, the IRS treats these as gifts of future interest. That means a Form 709 gift tax return for every year you contribute, even if it’s just $1,000 from Grandma. Congress may issue a technical correction — the same way they did for 529 plans — but until that happens, this is the rule.
We’d rather our clients plan around that wrinkle now than discover it at tax time. If you have kids or grandchildren and want to understand how Trump Accounts fit alongside your 529s, custodial accounts, and broader gifting strategy, give us a call.
For informational and educational purposes only. Not investment, tax, or legal advice. Lake Hills Wealth Management is a Registered Investment Advisor registered with the Securities and Exchange Commission. Registration as an investment adviser does not imply a certain level of skill or training. Our current Form ADV, Part 2A is available at adviserinfo.sec.gov.