Tax Hot Topics
The IRS on Dec. 3 published Notice 2025-68 (PDF - 222 KB), providing the first guidance on Trump accounts, a new type of tax-advantaged savings account for children introduced under the tax legislation known as the One Big Beautiful Bill Act (OBBBA). Trump accounts will be established in 2026 and a pilot program will apply to each qualifying child born in 2025–28, but no contributions can be made until July 4, 2026.
These new accounts will function like traditional individual retirement accounts (IRAs) for eligible minors and are generally subject to an aggregate annual contribution limit of $5,000 (subject to a cost-of-living adjustment after 2027). In addition, each qualifying child born after Dec. 31, 2024, and before Jan. 1, 2029, is eligible to receive a one-time $1,000 federal contribution to a Trump account, which will not count against the aggregate annual limit.
Notice 2025-68 outlines how the accounts will operate and how they differ from traditional IRAs. For example, the funds must be invested in broad U.S. equity index funds and generally cannot be withdrawn until the child turns 18, after which the account will be subject to the rules of a standard IRA.
The IRS’s notice is an initial overview, announcing upcoming proposed regulations and introducing draft Form 4547 to elect and open the accounts. It indicates that more detailed rules and reporting forms will follow and that additional information can be obtained online at Trumpaccounts.gov.
The guidance makes clear that employer contributions to Trump accounts are allowed under the new law. Businesses can contribute up to $2,500 per year to the Trump account of an employee or of the dependent of an employee, and this amount will not be treated as taxable income to the employee. The $2,500 maximum applies to each employee, regardless of how many eligible dependents the employee has.
A Trump account contribution program may be offered via salary reduction under a Section 125 cafeteria plan if the contribution is made to the Trump account of the employee’s dependent, but not if the contribution is made to the Trump account of the employee. All contributions from parents, employers and others (other than exempt government contributions) will count toward the annual $5,000 cap and will enjoy tax-deferred growth within the account.
Grant Thornton insight:
The allowance of employer contributions essentially creates a new tax-free benefit for employees under the new Section 128. Companies should prepare for the Trump account program’s rollout in 2026, as it may affect employee benefit planning, payroll processes and tax reporting.
In the near term, employers might consider whether to offer Trump account contributions as a benefit for employees with eligible children. Employer contributions (up to $2,500 per employee annually) would be deductible business expenses and excluded from the employee’s income, making it a cost-effective way to support employees’ families.
To implement this, businesses will need to coordinate with plan administrators or financial institutions once accounts become available and ensure internal systems can track these payments separately from wages. As noted, no contributions can be made until July 4, 2026.
Contacts:
Content disclaimer
This content provides information and comments on current issues and developments from Grant Thornton Advisors LLC and Grant Thornton LLP. It is not a comprehensive analysis of the subject matter covered. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC and Grant Thornton LLP. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this content.
For additional information on topics covered in this content, contact a Grant Thornton professional.
Grant Thornton LLP and Grant Thornton Advisors LLC (and their respective subsidiary entities) practice as an alternative practice structure in accordance with the AICPA Code of Professional Conduct and applicable law, regulations and professional standards. Grant Thornton LLP is a licensed independent CPA firm that provides attest services to its clients, and Grant Thornton Advisors LLC and its subsidiary entities provide tax and business consulting services to their clients. Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
Tax professional standards statement
This content supports Grant Thornton Advisors LLC’s marketing of professional services and is not written tax advice directed at the particular facts and circumstances of any person. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. If you are interested in the topics presented herein, we encourage you to contact a Grant Thornton Advisors LLC tax professional. Nothing herein shall be construed as imposing a limitation on any person from disclosing the tax treatment or tax structure of any matter addressed herein.
The information contained herein is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as, accounting, legal, tax, or professional advice provided by Grant Thornton Advisors LLC. This material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of tax and nontax factors not described herein. Contact a Grant Thornton Advisors LLC tax professional prior to taking any action based upon this information.
Changes in tax laws or other factors could affect, on a prospective or retroactive basis, the information contained herein; Grant Thornton Advisors LLC assumes no obligation to inform the reader of any such changes. All references to “Section,” “Sec.,” or “§” refer to the Internal Revenue Code of 1986, as amended.
Grant Thornton Advisors LLC and its subsidiary entities are not licensed CPA firms.
Trending topics
Share with your network
Share