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 one missed step means the $1,000 starting deposit remains locked away forever. Here’s 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 no one in their family opened.
On October 1, 2026, the Treasury Department announced that automatic enrollment into Trump accounts was being carried out. Every eligible child under 18 with a valid Social Security number now has an account. However, no money flows until a parent claims the account, and that includes the $1,000 government start-up deposit.
What changed between Tuesday and Thursday
Before: Registration was optional. Parents filed IRS Form 4547 through the Trump Accounts app, launched July 4, or did so at tax time or on the IRS website. Previous Treasury guidance indicated that automatic enrollment was not practical. As of mid-September, approximately 7 to 8 million children had signed up. A Commonwealth study found that only 5 percent of eligible low- and moderate-income families had opened one.
NOW: Temporary regulations (TD 10056) came into effect on September 30. They allow the Treasury to open accounts through a master group trust, so it can enroll children without revealing anyone’s tax return information. The Treasury estimates that the rules affect around 73 million children in 44 million families. A grant program in Maine suggested that voluntary registrations would be stagnant around 50%.
“Thanks to automatic enrollment, more than 60 million additional eligible children now have accounts ready to claim,” Treasury Secretary Scott Bessent said in a statement.
Three sections of code that control every dollar
- Section 530A defines the Trump account. Legally, it is a traditional IRA with special rules that generally disappear the year the child turns 18. Family and friends can contribute up to $5,000 per year combined, and this cap increases the cost of living after 2027.
- Item 6434 creates the pilot program: a $1,000 Treasury deposit for U.S. citizens born between 2025 and 2028.
- Section 128 allows employers to contribute up to $2,500 per employee per year, and the employee does not owe income tax on this amount.
The pilot deposit and “qualified general contributions” to charity, such as Michael and Susan Dell’s $6.25 billion pledge, fall outside the $5,000 cap.
Real World Example: How a Grandparent’s $5,000 is 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 an annual return of 7%. It does not benefit from any tax deduction, because contributions are paid after tax (in accordance with IRS notice 2025-68).
| Double | Amount |
|---|---|
| Total contributions (after tax) | $85,000 |
| Account value after 17 years | $164,995 |
| Growth, taxed as ordinary income when taken | $79,995 |
| Pilot launch of $1,000 after 18 years at 7% | $3,380 |
Traditional IRA withdrawal rules apply. The base $85,000 comes back tax-free and the growth is considered taxable income (according to the Congressional Research Service). If she takes before age 59½, she may also have to pay a 10% penalty, with some exceptions. Seed money receives less favorable treatment. It was never taxed, so the entire $3,380 would be taxable.
Compare a bank CD. The national average FDIC 12-month CD rate is 1.73% and this interest is taxed annually.
Your next step: Claim first, then register separately
Auto-enrollment does not trigger the $1,000 payment. Here is the command:
- Download the official Trump Accounts app and verify your identity and relationship to the child.
- Verify the child’s information and agree to the account terms.
- If your child was born between 2025 and 2028, register separately to receive the $1,000 deposit.
- Tell grandparents and employers that contributions cannot be made until the account has been claimed.
Families who skip the first step leave the start-up capital and any employer matching unclaimed. Some parents who registered using the old method discovered the change by surprise. One told the Post he was rejected twice on paper, then received an unexpected email confirming his son’s registration.
Watch these rule changes before funding big
The temporary rules were accompanied by a draft regulation (CC-00226466-26) which is still open for revision. The new rules also cover stock donations, which Treasury hopes 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 opening a Trump account versus a 529 plan or custodial Roth should make this comparison with a licensed tax professional or trusted financial professional, as tax treatment upon withdrawal varies widely.
Contact (email protected) for any questions or corrections.
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