Trump Accounts and the One Big Beautiful Bill Act: A New Era for Tax-Deferred Savings

The One Big Beautiful Bill Act (OBBBA) brought with it a bold new savings vehicle that has the attention of taxpayers, advisors and policy analysts alike. At the center of this legislation are “Trump Accounts.” These are a federally backed savings tool designed to promote long-term wealth accumulation starting at birth. The bill outlines two major tax-driven incentives: a $1,000 government-funded contribution at birth, and the ability for taxpayers to make up to $5,000 in tax-deferred contributions annually to the account.

The structure of the account is straightforward. Trump Accounts operate similarly to 529 college savings plans or Roth IRAs in terms of tax treatment, but they aren’t limited to education or retirement. Contributions grow tax deferred. This flexibility makes them one of the most versatile savings options available.

Analysts anticipate that these accounts could inject more than $80 billion into long-term U.S. savings in the first five years of implementation. For context, that’s more than the total assets held in Coverdell ESAs at their peak.

The difference here is accessibility and universality. Unlike existing options, the Trump Account is not tied to income, education or employment status. Every child born between Jan. 1, 2025, to Dec. 31, 2028, is eligible to receive the $1,000 at-birth contribution automatically, assuming a Social Security number is issued and the account is activated within the first 18 months of life.

The One Big Beautiful Bill Act also outlines a detailed framework for how funds can be used. Qualifying expenses include higher education, home purchases, healthcare and even business startup costs (all tax deferred under current provisions). This expansion of eligible use cases is what sets Trump Accounts apart from previous savings programs.

For many Americans, this legislation represents a practical way to begin building intergenerational wealth. But like any tax-advantaged tool, the benefits depend on thoughtful planning and early action.

Breaking Down the $1,000 at Birth Contribution

The headline feature of the Trump Account is the federal government’s $1,000 deposit for every child born in the United States between Jan. 1, 2025, to Dec. 31, 2028. This contribution is not income based and is structured to be automatic once a Trump Account is opened within the first 18 months of life.

This initiative is especially meaningful for middle-income and underserved families. Less than 30% of children under the age of five currently have any savings set aside in their name. By guaranteeing this initial investment, the government is providing a baseline level of opportunity and encouraging families to build on it.

From a tax planning perspective, this contribution does not count as income for the child or the parents. It is also not considered a gift under current IRS definitions, so it does not impact gift tax limits or require reporting. This clarity makes it easier for families to include Trump Accounts in broader wealth strategies without needing complex adjustments or tax disclosures.

There is also a planning opportunity here for high-net-worth individuals looking to build legacy wealth. By pairing the government’s initial $1,000 deposit with annual family-funded contributions (covered in the next section), taxpayers can structure significant, tax-deferred savings over decades. With compound growth, even modest additions to the account can result in substantial long-term gains.

We’re already advising clients to include these accounts in their financial plans starting in 2025. Whether you’re a parent, grandparent or guardian, taking action within the first year of a child’s life opens the door to a range of financial possibilities that would not exist otherwise. If you’re unsure where to begin, our Individual Tax Services team can help you assess the impact and integrate this tool into your overall tax strategy.

Annual $5,000 Contributions: A Long-Term Tax-Deferred Strategy

The $1,000 at-birth contribution is only the beginning. The real opportunity with Trump Accounts lies in the ability to contribute up to $5,000 per year for each eligible child (not per household), offering a powerful path to long-term, tax-deferred growth.

These contributions are not tax deductible, but the earnings grow tax deferred until withdrawn for qualified expenses. Over time, this structure supports meaningful savings and provides flexibility not found in more restrictive vehicles like 529 plans or custodial accounts.

Unlike education-only plans, Trump Accounts allow for a broad range of tax-deferred uses. Qualifying expenses include:

• Higher education costs
• First-time home purchases
• Certain healthcare expenses
• Costs associated with starting a business

This opens the door for more practical and immediate planning. For example, a family contributing $5,000 annually for 18 years could accumulate $90,000 in total contributions. If those funds are invested with an average annual return of 6%, the account could grow to more than $150,000 by the time the child turns 18.

For high-income families, this account also becomes an efficient tool for wealth transfer. Since Trump Account contributions are not considered gifts under current IRS guidance, contributors can make annual deposits without reducing their annual gift tax exclusion. In practice, this allows parents and grandparents to make additional tax-deferred contributions while maintaining other wealth transfer strategies. (Our estate planning team can help guide efforts like these.)

Early adoption will likely yield the most significant benefits. The earlier compound interest is applied, the greater the long-term benefit. Planning now can maximize those returns.

Planning Ahead: What This Means for Households and Business Owners

Trump Accounts offer more than just a savings tool. They represent a strategic opportunity for long-term financial planning. Whether you’re managing a household budget or overseeing a successful business, these accounts can be tailored to support your specific goals.

For households, it provides another way in which parents can plan for their child’s education, first home or healthcare needs using a single vehicle. Unlike 529 plans, which penalize non-education withdrawals, Trump Accounts provide more options for use of the funds.

Business owners may also benefit from incorporating Trump Accounts into broader tax strategies. For example, owners of pass-through entities can use available cash flow from tax savings to fund Trump Accounts for their children or grandchildren. This creates a dual benefit: immediate tax efficiency and long-term financial security for their family.

Companies might even consider contributions to Trump Accounts as part of employee benefits. While this approach will require future IRS guidance and possible regulatory clarification, it signals the potential for these accounts to extend beyond family use. Employers who embrace financial wellness programs could find innovative ways to support their team members through contributions to these new savings plans.

Documentation, Deadlines and Compliance: What You Need to Prepare

Although the IRS is still developing detailed regulations and compliance procedures, the One Big Beautiful Bill Act includes some early guidance that taxpayers should begin preparing for now.

First, as stated earlier, a Trump Account must be opened within 18 months of a child’s birth. That means families who welcome a child within the eligibility period must be proactive in initiating the account to qualify for the $1,000 federal contribution.

Second, while contributions can come from a variety of sources, the annual $5,000 cap applies per child. That means total deposits from all sources combined (for example, grandparents or businesses) cannot exceed this limit each year. The IRS will likely require reporting to track contributions, similar to 529 plans. It’s also anticipated that a document similar to Form 5498 (used for IRA contribution information) will be introduced as part of this process.

Withdrawals for qualified expenses must be documented, and misuse of funds could result in penalties and back taxes. Just as with HSAs or Roth IRAs, taxpayers must retain receipts and verification to show that withdrawals were used for approved purposes like education, housing or healthcare.

Another important consideration is coordination with other savings tools. For example, if a child already has a 529 plan or a custodial brokerage account, families must determine how Trump Account contributions fit within their overall strategy. It may be necessary to shift funds or revise gifting plans to avoid overlap or contribution issues.

Finally, as with any new federal program, there may be updates or revisions over time. The IRS is expected to issue further guidance in early 2026. In the meantime, households and businesses should work with their tax advisors to put a plan in place and be ready when Trump Accounts officially launch.

A Strategic Savings Tool for a New Generation

The introduction of Trump Accounts marks a major shift in how families, individuals and businesses can approach tax-deferred savings. Whether you’re saving for a child’s education, funding a first home, planning for healthcare needs or encouraging entrepreneurship, the account provides the flexibility and tax treatment needed to make real progress.

The key is to act early and plan intentionally. These benefits are most effective when they are part of a broader strategy built around your financial goals and tax position. At James Moore, we help individuals and business owners do just that.

Contact a James Moore professional to learn how Trump Accounts can fit into your tax planning and financial strategy. Our team is ready to walk you through the details, help you avoid compliance pitfalls and position your family for long-term success.

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