IRS Proposes Regs on How to Open a Trump Account Under the OBBBA

The IRS has issued proposed regulations implementing the "Trump Account" — the new tax-advantaged savings vehicle created by Section 138G of the Internal Revenue Code, added by the One Big Beautiful Bill Act (OBBBA). The proposed rules establish contribution limits ($10,000 individual/$20,000 MFJ), qualified withdrawal categories, custodian requirements, and reporting obligations — filling the operational gaps that prevented financial institutions from offering the accounts since the OBBBA's passage.

For financial advisors and tax professionals, the Trump Account represents the most significant new savings vehicle since the creation of Health Savings Accounts in 2003 — with broader applicability, more flexible withdrawal rules, and no income limitations that restrict access.

Account Structure

The proposed regulations establish the following framework:

Contribution limits:

• Individual: $10,000 per year (indexed for inflation starting 2028)
• Married filing jointly: $20,000 per year
• Minor accounts: $10,000 per year (contributed by parents/guardians)
• Lifetime contribution limit: None (accumulates indefinitely)
• No income phase-out (available to all taxpayers regardless of MAGI)

Tax treatment:

• Contributions: After-tax (no deduction, similar to Roth IRA)
• Growth: Tax-free (no capital gains, dividends, or interest taxed while in account)
• Qualified withdrawals: Tax-free and penalty-free
• Non-qualified withdrawals: Earnings taxed as ordinary income + 10% penalty (similar to Roth IRA early withdrawal on earnings)

Qualified withdrawal purposes:

• First-time home purchase (lifetime limit $50,000)
• Education expenses (tuition, books, room/board at accredited institutions)
• Small business startup costs (first $25,000 of qualifying expenses)
• Medical expenses exceeding 7.5% AGI threshold
• Retirement (after age 59½, any purpose)
• Disability
• Death (beneficiaries receive tax-free)

Investment options:

• Stocks, bonds, mutual funds, ETFs (same as brokerage account)
• Cash and money market
• Certificates of deposit
• Cryptocurrency (specifically permitted under proposed regs)
• Real estate (through REITs, not direct ownership)
• NOT permitted: collectibles, life insurance, S corporation stock

Key Differences from Existing Accounts

The Trump Account's unique advantage: it combines the flexibility of multiple existing accounts (education, home, business, retirement) into a single vehicle with no income restrictions. A household maxing out Trump Accounts ($20K/year) alongside Roth IRAs ($14K) and 401(k)s ($23.5K) can shelter $57,500+ annually in tax-advantaged savings.

Implementation Timeline

March 2026: Proposed regulations published (current) June 2026: Public comment period closes Q4 2026: Final regulations published January 2027: Financial institutions can begin accepting Trump Account contributions April 2028: First tax returns reporting Trump Account activity

Custodian Requirements

Financial institutions offering Trump Accounts must:

• Register as "qualified Trump Account custodians" with the IRS
• Implement systems to track contribution limits across institutions (aggregation required)
• Report annual contributions and withdrawals on new Form 5498-TA
• Verify qualified withdrawal purpose documentation
• Issue Form 1099-TA for distributions
• Maintain records for 7 years minimum

The compliance infrastructure is similar to IRA custodian requirements — meaning existing brokerage firms, banks, and qualified custodians can offer Trump Accounts with moderate systems development. Fidelity, Schwab, and Vanguard have all announced plans to offer Trump Accounts upon final regulation publication.

Financial Planning Implications

For young adults (18-30). The Trump Account is potentially the most valuable savings vehicle available: no income restrictions, tax-free growth, and withdrawals permitted for the three biggest expenses they face (education, first home, business startup). A 22-year-old contributing $10K/year for 8 years accumulates $80K+ (with growth) available tax-free for a home down payment at age 30.

For parents. Opening Trump Accounts for children at birth and contributing $10K/year creates a substantial tax-free fund for education by age 18 ($180K+ in contributions alone, plus growth). Unlike 529 plans, unused education funds can pivot to home purchase or business startup without penalty.

For high earners. No income phase-out means Trump Accounts are accessible to taxpayers excluded from Roth IRA contributions. A household earning $500K can contribute $20K/year to Trump Accounts where they can't contribute directly to Roth IRAs.

For business owners. The $25K qualified withdrawal for business startup costs creates a tax-efficient funding mechanism for serial entrepreneurs. Accumulating $100K+ in a Trump Account over 10 years provides significant startup capital accessible without tax friction.

Why This Matters

For financial advisors: The Trump Account changes optimal savings allocation strategies for every client. Update financial plans to incorporate Trump Accounts in the contribution hierarchy (typically: 401k match → HSA → Trump Account → Roth IRA → taxable). Clients who don't learn about Trump Accounts from their advisor will learn from competitors.

For tax professionals: Understand the withdrawal qualification rules NOW — before clients start making unqualified withdrawals that trigger taxes and penalties. The rules for "first-time home purchase" and "business startup costs" have specific definitions that differ from common understanding.

For accounting firms: Corporate clients will ask about Trump Accounts as employee benefits (similar to how employers offer Roth 401k). While Trump Accounts are individual accounts (not employer-sponsored), firms may offer payroll-deduction funding as a benefit feature.

For financial institutions: System development for Trump Account custody should begin immediately. First-to-market advantage in offering Trump Accounts (with marketing to the massive addressable market) will drive new account acquisition in 2027.

For estate planners: Trump Accounts pass to beneficiaries tax-free at death (similar to Roth IRA inherited rules). Incorporating Trump Accounts into estate planning — particularly for funding children's future home purchases or business ventures — creates a new planning tool.

The key takeaway: The Trump Account is the most flexible tax-advantaged savings vehicle since HSAs — offering tax-free growth and withdrawals for education, homeownership, and business startup with no income limits, making it the optimal first savings vehicle for anyone not maximizing employer 401(k) matches.