Trump Accounts (MAGA Accounts): CPA Guide to the New OBBBA Savings Vehicle

The One Big Beautiful Bill Act (OBBBA) created a new federal savings account for children called the Money Account for Growth and Advancement — commonly referred to as a Trump Account or MAGA Account. Every US citizen born after OBBBA's enactment receives a $1,000 federal seed contribution. Parents, grandparents, and other contributors can add up to $5,000 per year (inflation-indexed). Growth is tax-deferred. Qualified distributions starting at age 18 cover education, a first home, and small business startup costs. At age 30, any remaining balance rolls over to a Roth IRA. These accounts don't replace 529 plans, but they interact with them — and CPAs need to understand both the mechanics and the planning angle before advising clients with newborns or young children.

What Are Trump Accounts: Legal Structure and Federal Seed

Trump Accounts are created under a new section of the Internal Revenue Code, added by OBBBA. Each account is established by the federal government for eligible children at birth. The US Department of the Treasury deposits the $1,000 federal seed contribution into each qualifying child's account automatically — no application or parental action is required to receive the seed.

Who is eligible: US citizens born after OBBBA's enactment date. Non-citizen children, even with legal resident status, are not eligible for the federal seed or the account structure unless they later become citizens, in which case IRS guidance will need to address retroactive account establishment. CPAs advising immigrant families should flag this limitation and monitor IRS guidance.

Account custodian: The account is maintained by the Treasury Department (or its designated administrator) and is structured similarly to a defined contribution plan account. The underlying investment is directed to a registered investment company that tracks a broad US equity market index — account holders cannot self-direct into individual securities.

Social Security Number requirement: A valid SSN (or ITIN for purposes of account identification) is required for account establishment. Families who have not yet obtained an SSN for a newborn should do so promptly. The Treasury has confirmed that delays in SSN issuance do not forfeit the federal seed — the $1,000 is credited once the account is linked to a valid SSN.

Contribution Rules and Annual Limits

Beyond the $1,000 federal seed, the account accepts private contributions from any person — parents, grandparents, other family members, or unrelated third parties. Key rules:

• Annual contribution limit: $5,000 per year (indexed for inflation using the same CPI adjustment mechanism applied to IRA limits under IRC §219(b)(5)(C))
• No income limit for contributors: There is no AGI phase-out on the ability to contribute to a Trump Account. High-income clients can contribute the full $5,000 regardless of income
• Aggregate across all contributors: The $5,000 limit is per-beneficiary, not per contributor. If a grandmother contributes $3,000 in a tax year, parents can only add $2,000 more that year
• No deduction for contributions: Contributions are made with after-tax dollars and provide no federal income tax deduction. State deductions are not available at enactment; states may add their own incentives separately
• No catch-up contributions: There is no catch-up provision equivalent to the IRA catch-up for individuals over 50

Tracking annual limits across contributors is a practical planning challenge. CPAs should coordinate with the client's family — particularly when grandparents intend to contribute — to avoid inadvertent over-contribution. Excess contributions are subject to a 6% excise tax under rules analogous to IRC §4973 applied to traditional IRAs.

Tax Treatment: Contributions, Growth, and Distributions

Trump Accounts use a Roth-adjacent structure for contributions but apply a distinct distribution framework tied to the beneficiary's age:

The tax-deferred growth during the accumulation period means earnings are not included in the beneficiary's gross income while held in the account. This differs from a UTMA/UGMA account, where the "kiddie tax" rules (IRC §1(g)) can tax unearned income at the parent's rate. The Trump Account structure avoids that tax drag entirely during the holding period.

Basis tracking: Because contributions are after-tax, the contributor's basis is zero at the account level — distributions of principal (i.e., the original $5,000 contributions) are not separately tracked as basis in the same way Roth IRA contributions are tracked. Instead, the qualified/non-qualified distribution framework governs the tax treatment. CPAs should not assume that non-qualified distributions of principal are automatically tax-free; the statute treats the entire distribution as taxable if not used for a qualified purpose until IRS releases clarifying regulations.

Qualified Distributions: Age 18 to 30

Starting at age 18 and through age 30, the account beneficiary may take distributions for qualified purposes free of income tax and the 10% penalty. Three categories of qualified purposes are defined in OBBBA:

1. Qualified higher education expenses (QHEE): Tuition, mandatory fees, books, supplies, and equipment required for enrollment at an eligible educational institution, as defined in IRC §529(e)(3). Room and board are included if the student is enrolled at least half-time. This mirrors the 529 definition to allow coordination planning.

2. First home purchase: Amounts used toward the purchase of a principal residence where the beneficiary has not owned a primary residence within the prior three years. OBBBA sets a lifetime cap of $20,000 on first-home qualified distributions — amounts beyond $20,000 used for home purchase are treated as non-qualified.

3. Small business startup costs: Amounts used to fund startup expenditures within the meaning of IRC §195 in connection with a trade or business in which the account holder will be materially participating. The business must be active (not passive) and must not be a specified service trade or business under IRC §199A(d)(1). The annual cap on qualified distributions for this purpose is $10,000.

Distribution timing: The account holder (not the account custodian or parent) controls distributions after age 18. There is no requirement to take distributions before age 30; unused amounts roll over to a Roth IRA automatically at age 30. If the account holder dies before age 30, distributions to a named beneficiary are treated as if taken by the original beneficiary at the time of death for purposes of qualified/non-qualified classification.

Rollover to Roth IRA at Age 30

At age 30, any balance remaining in the Trump Account is automatically transferred to a Roth IRA established in the account holder's name. The rollover is:

• Tax-free: No income tax or penalty applies to the transfer
• Not subject to Roth contribution limits: The rollover does not count against the annual IRA contribution limit (currently $7,000 under IRC §408A, as adjusted)
• Subject to Roth IRA rules thereafter: Once rolled over, the account operates under standard Roth IRA rules — qualified distributions after age 59½ are tax- and penalty-free; the 5-year rule for Roth qualified distributions applies based on the year the Roth IRA was first funded

For a child born in 2026 who receives the federal seed and maximum annual contributions, the account could grow substantially by age 30 depending on market returns. At 7% average annual growth (illustrative, not a projection), a fully contributed account reaching $5,000 × 30 years plus the $1,000 seed could represent a meaningful Roth IRA balance — and is shielded from income tax for the remainder of the account holder's life. CPAs advising younger families should frame this in the context of multi-generational tax efficiency, consistent with the planning approach discussed in our guide to inheritance and gift tax planning.

How Trump Accounts Interact with 529 Plans

Trump Accounts are not a 529 replacement. They have narrower qualified distributions (three categories vs. the broader 529 definition), a lower annual contribution ceiling ($5,000 vs. $18,000 in practice under 529 superfunding rules), and a mandatory rollover timeline. The planning question for CPAs is: which account should be funded first, and how much?

Fund Trump Account to the annual limit first: The Roth IRA rollover at age 30 is a permanent and significant benefit. Once an account holder reaches 30, unused capacity is gone — unlike a 529 plan that can be transferred to another beneficiary or rolled to a Roth IRA up to $35,000 under the SECURE 2.0 provision (but only after 15 years of account existence). The Trump Account rollover has no 15-year seasoning requirement.

Use 529 for excess education savings: For clients who want to pre-fund education above the $5,000 annual cap, or who have near-term college tuition needs for older children, a 529 plan still offers state income tax deductions, a broader definition of qualified expenses, and the ability to accelerate contributions via 5-year gift tax averaging ("superfunding"). CPAs with clients in states offering 529 deductions should quantify the state tax benefit before deciding on allocation.

Avoid double-counting distributions: If the same education expense is paid from both a Trump Account and a 529 plan, only one can receive the tax exclusion. The same dollar of tuition cannot be a qualified distribution from both accounts simultaneously. Coordinate the sequence of distributions carefully in years when both accounts are active.

No restrictions on having both: A child can be the beneficiary of a Trump Account and a 529 plan simultaneously. There is no coordination limit or phase-out that applies to total account balances across account types.

For CPAs managing clients with existing 529 plans, this is an additive tool — not a replacement. For clients with newborns who haven't started any education savings, Trump Accounts should be opened and funded before 529 plans, given the Roth rollover advantage.

Gift Tax and Annual Exclusion Planning

Contributions to a Trump Account are a completed gift for federal gift tax purposes. This creates planning opportunities and traps:

Annual exclusion applies: Each contributor's gifts to a Trump Account count toward the $19,000 annual exclusion (2026 amount, per Rev. Proc. 2025-XX and inflation-adjusted). A parent contributing $5,000 to a Trump Account uses $5,000 of their $19,000 annual exclusion against that child. If the same parent also funds a 529 plan for the same child in the same year, those contributions are also gifts — all annual gifts to a single donee aggregate.

No superfunding allowed: Trump Accounts do not permit the 5-year election available for 529 plans (IRC §529(c)(2)(B)), which allows front-loading five years of annual exclusion in a single year. Each year's Trump Account contributions are subject to the annual $5,000 account limit and count as gifts in the year made.

Grandparent contributions: Grandparents can contribute to a grandchild's Trump Account without triggering the Generation-Skipping Transfer (GST) tax, provided the contributions do not exceed the annual exclusion. Contributions above the annual exclusion (from gifts to the same donee in the same year across all transfers) are potentially subject to both gift tax and GST tax. CPAs advising high-net-worth families should coordinate Trump Account contributions with 529 plan funding and any UTMA transfers in the annual gift tax planning window. See our year-end tax planning checklist for the framework to use across all family gifting strategies.

No present interest issue: Unlike Crummey trust contributions, a Trump Account contribution is a direct gift to the account, and the beneficiary has the right (at age 18) to access it. IRS has confirmed the present interest treatment for annual exclusion purposes — no Crummey notice or hanging power is required.

CPA Action Items: What to Do With OBBBA-Year Clients

For the 2026 filing year and subsequent years, CPAs should add Trump Account guidance to the standard new-client onboarding checklist and year-end planning protocol:

For clients with newborns in 2025–2026:

• Confirm the federal seed has been credited to the child's account (account holders will receive a Treasury notification; clients may not proactively track this)
• Calculate the remaining contribution capacity for the year ($5,000 minus federal seed = $4,000 in year one if seed was credited)
• Coordinate with grandparents on annual exclusion budgeting — total annual gifts to the child from all sources should be mapped against the $19,000 limit before advising on contribution amounts
• If the family has existing 529 plans, model the optimal split between 529 contributions and Trump Account contributions

For clients advising on OBBBA broadly: Trump Accounts are one of four major family-facing OBBBA changes worth addressing in client communications. The others include the increased QBI deduction at 23% for pass-through business owners, the SALT cap increase to $40,000 for itemizing taxpayers, and the tip and overtime pay deductions for service-sector employees. CPAs should consider bundling client communications across all four rather than addressing them piecemeal.

Monitor pending IRS guidance: At time of writing, the IRS has not released:

• Final list of qualifying occupations for tip deduction (separate from Trump Accounts, but relevant to the same OBBBA client communications)
• Regulations governing excess contribution correction procedures for Trump Accounts
• Guidance on Trump Account treatment when the beneficiary becomes a non-resident alien before age 30
• Clarification on basis tracking for non-qualified distributions of principal

CPAs should monitor IRS newsroom publications and subscribe to IRS e-News alerts for regulations and notices governing the new OBBBA provisions.

The Child Tax Credit Interaction

Trump Account contributions do not affect eligibility for the child tax credit, and the $1,000 federal seed is not includible in the parents' or child's gross income. However, CPAs should note that for clients phasing out of the child tax credit at $400,000 MFJ, Trump Account contributions have no AGI impact — they don't create a deduction that could reduce AGI into the credit phase-in range.

The federal seed itself is categorized as a government payment, not income — analogous to how Pell Grants are excluded from gross income (IRC §117). No Form 1099 or reporting obligation arises from the receipt of the $1,000 federal seed.

Frequently Asked Questions

Can a client contribute to both a Trump Account and a 529 plan for the same child?

Yes. There is no statutory prohibition on holding both account types simultaneously for the same beneficiary. The planning question is allocation — Trump Accounts should generally be funded first due to the Roth rollover advantage. 529 plans are appropriate for contributions above the $5,000 annual cap and for clients in states offering a state income tax deduction for 529 contributions.

Does the $5,000 annual limit include the $1,000 federal seed?

OBBBA's legislative text indicates that the federal seed is a government contribution and does not count against the $5,000 annual private contribution limit. In year one, a newly born child's account can receive both the $1,000 federal seed and up to $5,000 in private contributions, for a total of $6,000 in new contributions. IRS has not issued a formal ruling on this interpretation, but the statutory structure supports it.

What happens to a Trump Account if the child never uses it for a qualified purpose?

If no qualified distributions are taken between ages 18 and 30, the entire balance (federal seed + contributions + earnings) rolls over automatically to a Roth IRA at age 30. This is arguably the best outcome from a tax efficiency standpoint — the entire amount becomes Roth IRA basis, and future qualified Roth distributions (after age 59½) are tax-free for life.

Are Trump Account distributions reported on the child's tax return?

Qualified distributions are excluded from gross income and do not need to be reported as income. However, the account custodian (Treasury or its designated administrator) is expected to issue a Form 1099-Q equivalent reporting all distributions. The beneficiary (or their preparer) must retain documentation of the qualified purpose to support the exclusion.

Can a Trump Account be used to pay for private K-12 education?

No. Unlike 529 plans (which were expanded by TCJA to allow up to $10,000 per year for K-12 tuition), Trump Accounts do not include K-12 tuition as a qualified expense. The first eligible distribution is at age 18. Clients who want to fund private K-12 education should continue using 529 plans for that purpose.

What is the penalty for a non-qualified Trump Account distribution?

Non-qualified distributions (i.e., those taken before age 18 or for non-qualified purposes after age 18) are included in the beneficiary's gross income and subject to a 10% penalty tax, consistent with the penalty structure for early IRA distributions under IRC §72(t). The penalty is waived in cases of death or disability.

Do Trump Account contributions qualify for the annual gift tax exclusion?

Yes. Contributions from any person to a child's Trump Account are treated as completed gifts and qualify for the annual gift tax exclusion ($19,000 per donor per donee in 2026). There is no superfunding election available — contributions count as gifts in the year made only.

How do I handle a client whose child was born before OBBBA's enactment?

Children born before OBBBA's enactment date are not eligible for a federal Trump Account or the $1,000 federal seed. The accounts are forward-looking only. For these clients, 529 plans and UTMA/UGMA accounts remain the available tools for tax-advantaged minor savings. CPAs with younger client families who are planning to have additional children may want to note the Trump Account rules proactively.

Arvori helps CPAs manage the client communication complexity around OBBBA and other legislative changes — matching CPAs with insurance advisors who serve the same client base. If you're building out your OBBBA advisory practice, learn more about how Arvori works.