“Trump Account”, a hybrid of IRA and a 529 plan, offers a new way for families to jumpstart their children’s long-term financial security.
Key Provisions:
- Annual Contributions: Total contributions to a Trump Account (including employer and other sources) are capped at $5,000 annually per eligible child.
- Federal Seed Money: As part of a pilot program, children born between January 1, 2025, and December 31, 2028, are eligible for a one-time $1,000 contribution from the federal government.
- Employer Participation: Employers may contribute up to $2,500 per employee annually toward a dependent’s account. Under Section 128, these contributions are generally excluded from the employee’s taxable income.
- Investment Focus: To encourage domestic growth, funds are invested in broad-based funds tracking the S&P 500 or other primary American equity indices.
- Long-Term Growth: Funds are preserved until the child turns 18. At that point, the account functions like a traditional IRA, but with added flexibility for penalty-free withdrawals for education, a first-time home purchase, or starting a business.
Key Takeaways:
- To participate for the 2025 tax year, you must file Form 4547 with your federal tax return or enroll online trumpaccounts.gov on or after July 4, 2026.
- As this is a new program, additional IRS guidance is expected.
- Tax laws are complex and vary based on individual circumstances.
These strategies are general in nature and not a substitute for professional tax advice. Before implementing these strategies, it’s best to consult with a financial advisor and tax professional to ensure that they align with your specific financial situation.
Please reach out to your Brown CPA Group professional team with any questions at (847) 509-4100.