The IRS Just Changed the Rules for Trump Accounts. Here’s What 60 Million Parents Need to Know
The government just opened a retirement account for your child without asking, but a single missed step means the $1,000 seed deposit stays locked away forever. Here is what parents need to do before the rules change again.
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More than 60 million American children now have a tax-deferred retirement account that nobody in their family opened.
On October 1, 2026, the Treasury Department announced that automatic enrollment for Trump Accounts is done. Every eligible child under 18 with a valid Social Security number now has an account. However, no money moves until a parent claims the account, and that includes the government’s $1,000 seed deposit.
What Changed Between Tuesday and Thursday
Before: Enrollment was opt-in. Parents filed IRS Form 4547 through the Trump Accounts app, which launched July 4, or did it at tax time or on the IRS website. Treasury’s earlier guidance said automatic enrollment wasn’t practical. By mid-September, about 7 million to 8 million children had signed up. A Commonwealth study found that only 5% of eligible low- to moderate-income families had opened one.
Now: Temporary regulations (T.D. 10056) took effect Sept. 30. They let Treasury open accounts through a master group trust, so it can enroll children without revealing anyone’s tax return information. Treasury estimates the rules reach about 73 million children in 44 million families. A grant program in Maine suggested that opt-in enrollment would have stalled around 50%.
“With automatic enrollment, over 60 million more eligible children now have an account ready to be claimed,” Treasury Secretary Scott Bessent said in a statement.
Three Code Sections That Control Every Dollar
- Section 530A defines the Trump Account. Legally it’s a traditional IRA with special rules that mostly fall away in the year the child turns 18. Family and friends can contribute up to $5,000 a year combined, and that cap gets cost-of-living increases after 2027.
- Section 6434 creates the pilot program: a $1,000 Treasury deposit for U.S. citizens born in 2025 through 2028.
- Section 128 lets employers contribute up to $2,500 per employee per year, and the employee doesn’t owe income tax on it.
The pilot deposit and charitable “qualified general contributions,” such as Michael and Susan Dell’s $6.25 billion pledge, sit outside the $5,000 cap.
Worked Example: How a Grandparent’s $5,000 Gets Taxed
Consider a hypothetical grandmother who deposits $5,000 at the start of each year for 17 years into the account of a granddaughter born in 2026. Assume a 7% annual return. She gets no tax deduction, because contributions go in after tax (per IRS Notice 2025-68).
| Line | Amount |
|---|---|
| Total contributions (after-tax basis) | $85,000 |
| Account value after 17 years | $164,995 |
| Growth, taxed as ordinary income when take | $79,995 |
| $1,000 pilot seed after 18 years at 7% | $3,380 |
Traditional IRA withdrawal rules apply. The $85,000 of basis comes back tax-free, and the growth counts as taxable income (per the Congressional Research Service). If she take before age 59½, she can also owe a 10% penalty unless an exception applies. The seed money gets less favorable treatment. It was never taxed going in, so the whole $3,380 would be taxable.
Compare a bank CD. The FDIC national average 12-month CD rate is 1.73%, and that interest is taxed every year.
Your Next Step: Claim First, Then Opt In Separately
Automatic enrollment does not trigger the $1,000 payment. Here’s the order:
- Download the official Trump Accounts app and verify your identity and your relationship to the child.
- Review the child’s information and accept the account terms.
- If your child was born in 2025 through 2028, opt in separately to receive the $1,000 deposit.
- Tell grandparents and employers that contributions can’t get in until the account is claimed.
Families who skip step one leave the seed money and any employer match sitting unclaimed. Some parents who signed up the old way found out about the switch by surprise. One told The Post he had been rejected twice on paper, then received an unexpected email confirming his son’s enrollment.
Watch These Rule Changes Before Funding Big
The temporary rules came with proposed regulations (CC-00226466-26) that are still open for revision. The new rules also cover gifts of stock, which Treasury expects to bring in billions of dollars in contributions each year. The program’s designer, Luke Pettit, is leaving Treasury for the private sector, so keep an eye on who takes over the final rules.
Grandparents considering a Trump Account against a 529 plan or a custodial Roth should run that comparison with a licensed tax expert or trusted financial professional, because the tax treatment at withdrawal varies widely.
Contact [email protected] for any questions or corrections.
Vilma Rios is a tax professional and tax content contributor with more than 15 years of experience in tax and accounting. She specializes in federal tax research, tax education, and translating complex tax rules into clear, practical information for individuals, families, and small-business owners.
Vilma is a Content Tax Contributor II with the National Association of Tax Professionals (NATP), where she contributes to tax education and professional content. She has also presented tax information through webinars, including Spanish-language tax education, and has appeared on Telemundo 47 discussing tax topics and helping viewers understand important tax-filing requirements.
Her experience also includes tax and accounting work, tax research, IRS-related matters, and public tax education. While in college, Vilma volunteered in an IRS-sponsored tax assistance program and was recognized for her community service by local and state officials.
Known as “Your Tax Geek,” Vilma is passionate about making taxes easier to understand and helping people navigate an increasingly complex tax system.
