The IRS Just Changed the Rules for Trump Accounts. Here’s What 60 Million Parents Need to Know

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 the completion of automatic enrollment for Trump Accounts. Every eligible child under 18 with a valid Social Security number now has an account on the books. The catch: no money moves until a parent claims it, 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 filed at tax time through the IRS website. Treasury’s earlier guidance held that 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 September 30. They allow Treasury to open accounts through a master group trust structure, which lets it enroll children without exposing 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 alone 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 is 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 does not owe income tax on it. Note that this employer contribution counts against the combined $5,000 annual cap.

The pilot deposit and charitable “qualified general contributions” sit outside the $5,000 cap. One prominent example: Dell Technologies (NYSE:DELL | DELL Price Prediction) founder Michael Dell and his wife Susan pledged $6.25 billion on Giving Tuesday 2025 to deposit $250 into the accounts of up to 25 million American children age 10 and under in ZIP codes with a median family income of $150,000 or less. Their contribution targets children born before January 1, 2025, who don’t qualify for the federal $1,000 seed deposit.

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).

Traditional IRA withdrawal rules apply. The $85,000 of basis comes back tax-free, while the $79,995 in growth counts as taxable ordinary income (per the Congressional Research Service). If she withdraws before age 59.5, a 10% early withdrawal penalty may also apply unless an exception covers the situation. The seed money faces less favorable treatment: it was never taxed going in, so the full $3,380 would be taxable on withdrawal.

For comparison, the FDIC national average for a 12-month CD stands at 1.73%, and that interest is taxed in the year it is earned rather than deferred.

Your Next Step: Claim First, Then Opt In Separately

Automatic enrollment does not trigger the $1,000 payment. Here is the required order:

1. Download the official Trump Accounts app and verify your identity and your relationship to the child.
2. Review the child’s information and accept the account terms.
3. If your child was born in 2025 through 2028, opt in separately to receive the $1,000 deposit.
4. Tell grandparents and employers that contributions cannot reach the account until it has been claimed.

Families who skip step one leave the seed money and any employer match sitting unclaimed. Some parents who had signed up under the old opt-in system learned 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 regulations came alongside proposed regulations (CC-00226466-26) that remain open for public comment through November 30, 2026, with a public hearing potentially scheduled for December 15, 2026. The new rules also cover gifts of publicly traded stock, which Treasury expects will drive billions of dollars in contributions each year. Donated shares must be held for five years before they can be sold from the account.

Luke Pettit, the assistant secretary who architected the Trump Accounts rollout, departed Treasury in October for the private sector. He served as Acting Under Secretary for Domestic Finance and oversaw everything from the low-cost index-fund investment lineup to employer-contribution rules. His exit means the team finalizing the permanent regulations will be led by new personnel, so families should monitor any guidance updates as the November 30 comment deadline passes.

Grandparents weighing a Trump Account against a 529 plan or a custodial Roth should work through that comparison with a licensed tax professional, because the tax treatment at withdrawal varies widely across all three vehicles.

Editor’s note: This update clarifies that employer contributions under Section 128 count against the combined $5,000 annual cap, adds the November 30, 2026 public comment deadline and the December 15 hearing date for proposed regulations (CC-00226466-26), confirms Luke Pettit’s October departure from Treasury, and adds context on the Michael and Susan Dell $6.25 billion pledge including the $250-per-child structure and income-based ZIP code eligibility requirement.

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