The Department of Treasury has announced the activation of the new child IRA accounts also known as "Trump Accounts." These tax-deferred accounts formally launch later this summer.

Treasury Secretary Scott Bessent reports that six million children have been enrolled in the Section 530A Trump Accounts. Parents and other qualified adults are submitting IRS Form 4547, Trump Account Election(s) to enroll. The Treasury also launched a smartphone app for the Trump Accounts. The smartphone app is controlled by the Department of Treasury, but it was developed by Bank of New York Mellon Corp. and Robinhood Markets, Inc.

The smartphone app enables enrollment of children, contributions to Trump Accounts and tracking the investments. The Treasury plan is to have investment funds "in a diversified portfolio of low-cost index funds designed to maximize long-term growth while minimizing risk."

Secretary Bessent stated, "I think this is going to be one of the greatest real-time financial literacy educations in history. American families are going to be able to look on their phone every day and see, and I think it is going to drive people to try to understand what they have got here. I think we are going to create a generation of shareholders."

On May 28, 2026, the Internal Revenue Service (IRS) published a letter that explains the new accounts. The IRS encourages parents to submit Form 4547, Trump Account Election(s). IRS CEO Frank J. Bisignano stated, "These new features reflect our continued focus on transforming the IRS into a digital-first agency that delivers a faster, more seamless experience for taxpayers and provides a new tax-advantaged investment account for children to save for college, retirement, and building generational wealth.”

The U.S. Census Bureau estimates there are 73 million Americans under the age of 18. With six million accounts, 67 million additional children can sign up for this benefit.  If parents give $5,000 per year from birth to an account, with an added seed of $1,000 from the federal government to eligible children, the child’s  IRA could be worth about $150,000 or more by age 18.  If the child holds this account in an index fund with an 8% return, by age 65 it could grow tax-free to over $5,000,000.

Editor's Note: The official opening date for the Trump accounts will be July 4, 2026. Children born during 2025 through 2028 will be able to receive a $1,000 contribution from the federal government. There may also be contributions by the state government or the employer of the parent. Companies are permitted to give up to $2,500 per year to benefit children of employees within the total cap of $5,000.

JCT Explains Trump Account Contributions

In JCX-1-26, the Joint Committee on Taxation (JCT) published an explanation of the One Big Beautiful Bill Act (OBBBA). The JCT explanation included a description of the new Section 530A that creates "Trump Accounts."

The general explanation covers many of the basic provisions of the account. The beneficiary must have a social security number and be under age 18 at the close of the calendar year. The account may be established on behalf of a child under age 18 by their parent, other qualified adult or the Treasury Secretary. The account is generally similar to a traditional IRA. However, there are specific additional rules that apply until the beneficiary reaches age 18. The accounts cannot be funded until a period of 12 months after enactment of OBBBA, or July 4, 2026.

Total contributions each year are limited to $5,000. However, there are exempt contributions that may be in addition to this amount. Contributions are not deductible under the normal IRA rules, and they do not affect other IRA contribution limits. Contributions must be made during the calendar year, and the April 15 exception for IRA contributions does not apply to Section 530A.

The exempt contributions include qualified rollovers, qualified general contributions and contributions from the government under the Trump Accounts Contribution Pilot Program. The rollover is a trustee-to-trustee transfer from one Trump Account to another Trump Account maintained for the same beneficiary. The entire balance must be rolled over.

A qualified general contribution is one received from a state or the United States, an Indian tribal government or a Section 501(c)(3) nonprofit. The general contribution must be for a qualified class. This class must include a broad group of beneficiaries and could apply to a specific state or other geographic area. The geographic area must include at least 5,000 account beneficiaries and be designated by the Treasury Secretary.

A qualified general contribution is not included in the beneficiary’s income. Employers may also contribute to the Trump Account of an employee or a dependent of an employee, and these contributions are not included in the employee's gross income. The employer must have a written plan, and the annual limit is $2,500 per employee. The employer plan may apply only to employees or dependents of employees who are under age 18. It must meet requirements similar to a dependent care assistance program, such as those related to nondiscrimination, eligibility and employee notices.

JCT Explains Trump Account Investments and Distributions

In the Joint Committee on Taxation (JCT) "Blue Book," there is a detailed explanation of the Trump Account investments, distributions and trustee requirements.

The investment is intended to be in a low-cost index fund. The index fund may not use leverage and must have fees that are less than 0.1% of the balance in the fund. An example of a qualified index would be one based on the Standard and Poor’s 500 stock market index. Other indices that are primarily U.S. companies and comprised of equity investments could qualify. However, the index term "does not include any industry or sector-specific index based on market capitalization."

There are multiple rules regarding distributions. The distributions are generally precluded until the beneficiary is 18 years old. There are exceptions for a qualified rollover to a Trump Account, a rollover to an ABLE account, a return of an excess contribution or distribution after the death of the beneficiary.

The ABLE rollover contribution may be made in the calendar year when the beneficiary turns 17. It must be a trustee-to-trustee transfer to the ABLE account for the beneficiary. The entire Trump Account balance must be transferred to the ABLE account.

If there is an excess contribution, that excess contribution may be distributed from the account. However, there is a 100% tax on net income that is attributed to the excess contribution.

If an account beneficiary passes away prior to the calendar year in which he or she turns 18, the person who acquires the Trump Account interest will report the distribution (in excess of the account basis) as taxable income. If an estate receives the beneficiary's interest, then the taxable amount is included in the gross income for the tax return of the last year of the beneficiary's life. Exceptions to the taxable income rule are qualified general contributions, the Trump Accounts Contribution Pilot Program and employer contributions.

The Treasury Secretary will select qualified trustees for Trump Accounts. The trustee must meet standards for reliability and regulatory compliance. It must have an acceptable customer service history, and the costs must be within the 10-basis point limit. A trustee will make annual reports to the Secretary and the account beneficiary. These reports must state the amount and source of contributions in excess of $25, distributions, the fair market value of the account, the basis of the account and any other matters as determined by the Treasury Secretary. After a rollover, there must be a report to the Secretary with the name, address and social security number of the beneficiary, the name and address of the trustee, the account number and the routing number.

The Secretary will make a payment of $1,000 to the Trump Account of eligible children born during years 2025 through 2028. The $1,000 payment will be made if an election is exercised under the Trump Accounts Contribution Pilot Program. The election must list the child's social security number. The Treasury Secretary will treat the child as having made an overpayment of tax for the year of the election in the amount of $1,000. This amount will then be distributed to the Trump Account. It may include the payment of interest. Because it is treated as an overpayment of tax, it will not be subject to income taxation.

Applicable Federal Rate of 5.0% for June: Rev. Rul. 2026-11; 2026-24 IRB 1 (15 May 2026)

The IRS has announced the Applicable Federal Rate (AFR) for June of 2026. The AFR under Sec. 7520 for the month of June is 5.0%. The rates for May of 5.0% or April of 4.6% also may be used. The highest AFR is beneficial for charitable deductions of remainder interests. The lowest AFR is best for lead trusts and life estate reserved agreements. With a gift annuity, if the annuitant desires greater tax-free payments the lowest AFR is preferable. During 2026, pooled income funds in existence less than three tax years must use a 4.0% deemed rate of return. Charitable gift receipts should state, “No goods or services were provided in exchange for this gift and the nonprofit has exclusive legal control over the gift property.”