Recently, I met with senior staffers in DC from the Department of Treasury and the Internal Revenue Service to discuss the new Trump Accounts (IRC Sec 530A).  The sessions were very informative and I want to share important information with you regarding these accounts. 

The Working Families Tax Cuts provides for establishing a Trump Account on behalf of every eligible child for whom an election is made, generally by a legal guardian, parent, adult sibling or grandparent -in that order, and such child has not turned age 18 before the end of the calendar year in which the election is made. For example, if the child doesn’t have a legal guardian, then either parent of the child can make the election regardless of filing status. By making the election, the authorized individual is representing, under penalties of perjury, that he or she is authorized to open the initial Trump account for the child.  For example, if an adult sibling is making the election, they would be representing that there was neither a legal guardian nor parent of the child available to make the election.

Contributions to Trump Accounts cannot be made before July 4, 2026.  While others can contribute, only parents or guardians can actually open the account on behalf of the child. There are no income thresholds requirements for a parent or guardian to open the account. Unlike traditional IRAs, you are also not required to have earned income in order to contribute to the account. In fact, if the minor has earned income, they can still contribute to a traditional or Roth IRA without any contribution overlap from the Trump Account.

Additionally, the federal government will make a one-time $1,000 pilot program contribution to the Trump Account of each eligible child for whom an election is made.  An eligible child is one who is a U.S. citizen and who is born on or after Jan. 1, 2025, through Dec. 31, 2028.  This contribution will be immediately invested in an index fund. To claim this investment, most families need merely check a box on Form 4547.  The accounts are tax-deferred, so money grows without being taxed until it’s withdrawn.  Distributions from the account cannot be made until the year that the child turns 18 years old. Once that takes place, the account transitions to traditional IRA rules, with distributions taxed as ordinary income. Premature distributions made prior to age 59 ½ come with additional penalties, with certain exceptions.

IRS issued Notice 2025-68 which provides further guidance.  According to the guidance, the Treasury Department will create the initial Trump account and place it with a financial institution. The Treasury Department will select one or more financial institutions to serve as the initial trustee/s of the Trump Accounts. While initial Trump Accounts will be concentrated in a few financial institutions, Trump accounts can be moved to another financial institution or nonbank trustee through the establishment of a rollover account. A rollover Trump account for an account beneficiary may be established only after the initial Trump account is created by the Treasury Department or its agent for the account beneficiary and only during the growth period of the account beneficiary. The rollover account must be funded by the full amount of the existing Trump account, which must be closed within a reasonable time after establishment of the rollover account. Per the IRS’ guidance, “[a] receiving trustee will be required to have procedures in place to confirm that the first contribution to the rollover Trump account is a qualified rollover contribution.” 

Rollovers include significant reporting requirements. Under 530A(i)(2), the trustee of the rollover account must, within 30 calendar days, provide an electronic report to the Treasury Department or its agent. The Treasury is seeking comment on ways to reduce this burden through automatic reporting and a proposed reporting format. In addition, the original (transferring) trustee must provide a report to the receiving trustee identifying the account as a Trump account and providing information regarding the basis in the transferred Trump account and the contributions received by the transferring trustee for the calendar year in which the qualified rollover contribution occurs. No particular form or format would be recommended for these trustee-to-trustee reports.

The guidance discusses the concept of a “growth period” which is the time between when the account is initially funded and January 1 of the year the beneficiary turns 18. During the growth period, up to $5,000 may be added annually, with that amount receiving a cost-of-living adjustment after 2027. After the growth period, the Trump account is treated as an IRA for withdrawals and may be rolled over into an IRA or other eligible retirement account.

There is several other funding mechanisms associated with the Trump Accounts.  Certain governmental entities and charities may also make qualified general contributions to Trump Accounts, if given to a qualified class of account beneficiaries. Several notable philanthropists, such as the Dell family, has pledged significant amounts of their own money to help fund Trump Accounts.  The administration has been working closely with a number of governors to determine the best way states can work with the federal government to expand access to Trump Accounts to as many children as possible. Thus far, 20 states are considering topping up the accounts.  State involvement can take many different forms: states can, for example, tie top-ups of Trump Accounts to completion of financial literacy courses. Or they can directly contribute to Trump Accounts at birth.

Other persons are also able to make contributions up to an aggregate limit of $5,000 per year. Contributions from individuals are NOT tax deductible. Furthermore, an employer may contribute to a Trump Account of the employee or the employee’s dependent up to $2,500 per year (which counts against the $5,000 annual limit) under an employer’s Trump Account contribution program, and the contribution will not count toward the employee’s taxable income. The annual contribution limits are indexed to inflation and will adjust starting after 2027.

The funds in Trump Accounts must be invested in certain mutual funds or exchange-traded funds that track the S&P 500 or another index of primarily American equities.

Amounts generally cannot be withdrawn from Trump Accounts before January 1st of the calendar year in which the child turns 18 years old. After that point, the account generally is treated as a traditional IRA and generally is subject to the same rules as other traditional IRAs.  If the child passes away before age 18, the account is closed and liquidated. Either the account’s inheritor beneficiary or the deceased child (if their estate is the beneficiary) must recognize the fair market value of the account, less any basis, as taxable ordinary income. The account cannot be rolled over to a surviving sibling’s Trump Account.

Finally, contributing money to a Trump Account is a gift. More explicitly, it is considered a gift of a future interest which doesn’t qualify for the annual exclusion.  To qualify for this annual exclusion, the gift must be of a present interest, i.e., a gift that the recipient can presently use or benefit from. A transfer to a 529 account is an exception to the present interest requirement. The Tax Code specifically states that contributions to a 529 account have no such present interest requirement, hence a donor’s transfer to a 529 account qualifies for the gift tax annual exclusion.

In its haste to adopt the Trump Account opportunity this past summer, Congress did not add a rule, consistent with the 529 contribution rule, that treats contributions to a Trump Account as satisfying the present interest requirement. Accordingly, a contribution to a Trump Account might not be viewed as having satisfied the Tax Code’s present interest requirement, which means that a donor’s contribution to a Trump Account will be viewed as a future interest and that contribution will use some of the donor’s lifetime gift tax exemption (or worse, cause a federal gift tax to be paid.)  In my conversations with Treasury and IRS staffers, they are leaning toward the same conclusion. Unless there is a remedial statutory correction, the prospective donor to a Trump Account will need to consider the costs of preparing a gift tax return, which might outweigh the benefit of any contribution to the Trump Account.

As you can see, this is a very complex set of rules and regulations and is not intended to be a complete or detailed analysis.  The staffers I met with candidly expressed how challenging it has been for them to create the implementable and operational mechanisms and tools to launch the Trump Accounts.  For example, the Treasury Department is only authorized to disburse money to pay refunds, not gifts of seed money to Trump Accounts.  They expect to issue further guidance in the coming months. 

It’s possible my software may provide mechanisms for me to file the form with your tax return but I don’t know when that will be confirmed.  Therefore, if you have eligible children, particularly a child born since January 1, 2025, I strongly encourage you to complete and file Form 4547 as soon as possible. I’ve attached it to this email. Save a copy and send it to me for my records.  Beginning sometime in the middle of 2026, you should be able to file this form online.  Click on this link to access instructions for the form:   

https://www.irs.gov/pub/irs-pdf/i4547.pdf or trumpaccounts.gov.  Please note that IRS may revise the instructions in the future.

Since the passage of the 2025 Act (formerly known as the One Big Beautiful Bill Act), an unusually high number of clients are asking: Is Social Security income exempt from taxation now? The confusion is understandable and stems from some mixed signals—bold campaign promises to end taxation on Social Security benefits and a mass e-mail and press release from the Social Security Administration claiming that the 2025 Act ensures that nearly 90% of Social Security beneficiaries will no longer pay federal income taxes on their benefits, providing meaningful and immediate relief to seniors who have spent a lifetime contributing to our nation’s economy.

Despite what you may have read or heard, the 2025 Act does not exempt Social Security benefits from taxation. In fact, the taxation of Social Security benefits hasn’t changed at all post-2025 Act—and, unfortunately, believing otherwise could prompt planning choices that end up increasing the amount of benefits subject to tax.

Back to Basics: How Social Security Benefits are Taxed

The taxation of Social Security benefits is very much dependent on a beneficiary’s “provisional income,” which is a combination of adjusted gross income (AGI), tax-exempt interest and half of the social security benefits [IRC Sec. 86]. The higher the income, the greater the federal income tax liability on Social Security benefits:

• For single filers with provisional income less than $25,000 and joint filers with provisional income less than $32,000, Social Security benefits are not subject to federal income tax.
• For single filers with provisional income between $25,000 and $34,000 and joint filers with provisional income between $32,000 and $44,000, up to 50% of their Social Security benefits could be taxed.
• For single filers with provisional income exceeding $34,000 and joint filers with provisional income exceeding $44,000, up to 85% of their Social Security benefits could be taxed.
• Married taxpayers who file separate returns are subject to tax on their benefits without a $25,000/$32,000 floor.

Example: S has $20,000 in taxable dividends, $2,400 of tax-exempt interest, and Social Security benefits of $9,000. So, S’s income plus half S’s benefits is $26,900 ($20,000 plus $2,400 plus 1/2 of $9,000). S must include $950 of the benefits in gross income (1/2 ($26,900 − $25,000)).

New Temporary 65+ Deduction

The 2025 Act introduced a temporary senior deduction for tax years 2025–2028: individuals age 65 or older can claim $6,000 ($12,000 for joint filers), whether they itemize or not. Both spouses can qualify on a joint return. The deduction is reduced by 6% of any MAGI over $75,000 (single) or $150,000 (joint), and it is in addition to the regular standard deduction for seniors and the blind.

Notably, this new deduction is not directly related to Social Security benefits—whether a person aged 65+ receives Social Security benefits or not, they will still be eligible for the deduction. More specifically, the new deduction is a “below-the-line” deduction (i.e., taken after calculating AGI); thus, the deduction doesn’t impact the taxability of Social Security benefits (which is calculated in part using AGI).

Full Phase-Out (Deduction eliminated): The deduction is completely eliminated for filers with MAGI above these amounts:

• Single, Head of Household: MAGI over $175,000.
• Married Filing Jointly: MAGI over $250,000. 

For tax planning purposes, remember the new deduction is not linked to Social Security benefits, and the tax rules for those benefits remain unchanged after the 2025 Act. If seniors mistakenly think Social Security is now tax-free, they may make choices—like Roth conversions—that raise taxable income and increase the amount of Social Security benefits subject to tax. For example, converting $100,000 from a 401(k) to a Roth adds $100,000 to income, which can make more of their Social Security benefits taxable. Beneficiaries should understand that the new law does not change this outcome.

Conclusion

Despite widespread confusion, the 2025 Act did not eliminate federal income taxation on Social Security benefits. The longstanding rules governing the taxability of Social Security benefits remain unchanged. While 2025 Act introduced a new, temporary deduction for individuals 65 and older, this deduction is not specific to Social Security benefits. Clarity and careful planning are essential to avoid unintended tax consequences in the post-2025 Act landscape.

The Internal Revenue Service recently announced that the amount individuals can contribute to their 401(k) plans in 2026 has increased to $24,500, up from $23,500 for 2025.

The limit on annual contributions to an IRA is increased to $7,500 from $7,000. The IRA catch‑up contribution limit for individuals aged 50 and over was amended under the SECURE 2.0 Act of 2022 (SECURE 2.0) to include an annual cost‑of‑living adjustment is increased to $1,100, up from $1,000 for 2025.

The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most 401(k), 403(b), governmental 457 plans, and the federal government’s Thrift Savings Plan is increased to $8,000, up from $7,500 for 2025. Therefore, participants in most 401(k), 403(b), governmental 457 plans and the federal government’s Thrift Savings Plan who are 50 and older generally can contribute up to $32,500 each year, starting in 2026. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in these plans. For 2026, this higher catch-up contribution limit remains $11,250 instead of the $8,000 noted above.

On September 16, 2025, the U.S. Department of the Treasury and Internal Revenue Service (IRS) issued final regulations implementing the Roth catch-up contribution provisions of the SECURE 2.0 Act of 2022. These provisions require employers to shift the tax treatment for catch-up contributions for higher earners and comply with new administrative obligations, with good faith compliance generally required.

Beginning in 2026, if a retirement plan participant age 50 or older who earned more than $150,000 in FICA wages from their employer in the prior year elects to make any catch-up contributions, those “higher earner” catch-up contributions will need to be made on a Roth (after-tax) basis. The threshold for who is a higher earner is indexed for inflation. Only wages from the participant’s common law employer count for this purpose, unless the plan document specifically provides for aggregation across related entities, such as common paymasters or controlled group members.

While plans are not required to offer Roth contributions, those that don’t will be prohibited from accepting catch-up contributions from otherwise eligible employees. This provision appears to effectively force sponsors of plans that currently allow only pre-tax catch-up contributions to either (1) amend their plans to permit Roth deferrals, or (2) limit catch-up eligibility to non-highly compensated employees.

The income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs and to claim the Saver’s Credit all increased for 2026.

Taxpayers can deduct contributions to a traditional IRA if they meet certain conditions. If during the year either the taxpayer or the taxpayer’s spouse was covered by a retirement plan at work, the deduction may be reduced, or phased out, until it is eliminated, depending on filing status and income. (If neither the taxpayer nor the spouse is covered by a retirement plan at work, the phase-outs of the deduction do not apply.) Here are the phase‑out ranges for 2026:

• For single taxpayers covered by a workplace retirement plan, the phase-out range is increased to between $81,000 and $91,000, up from between $79,000 and $89,000 for 2025.
• For married couples filing jointly, if the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to between $129,000 and $149,000, up from between $126,000 and $146,000 for 2025.
• For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the phase-out range is increased to between $242,000 and $252,000, up from between $236,000 and $246,000 for 2025.
• For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.

The notice also provides limitations for 2026 for Roth IRAs, the Saver’s Credit and SIMPLE retirement accounts.

• The income phase-out range for taxpayers making contributions to a Roth IRA is increased to between $153,000 and $168,000 for singles and heads of household, up from between $150,000 and $165,000 for 2025. For married couples filing jointly, the income phase-out range is increased to between $242,000 and $252,000, up from between $236,000 and $246,000 for 2025. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains between $0 and $10,000.
• The income limit for the Saver’s Credit (also known as the Retirement Savings Contributions Credit) for low- and moderate-income workers is $80,500 for married couples filing jointly, up from $79,000 for 2025; $60,375 for heads of household, up from $59,250 for 2025; and $40,250 for singles and married individuals filing separately, up from $39,500 for 2025.
• The amount individuals can generally contribute to their SIMPLE retirement accounts is increased to $17,000, up from $16,500 for 2025. Pursuant to a change made in SECURE 2.0, individuals can contribute a higher amount to certain applicable SIMPLE retirement accounts. For 2026, this higher amount is increased to $18,100, up from $17,600 for 2025.
• The catch-up contribution limit that generally applies for employees aged 50 and over who participate in most SIMPLE plans is increased to $4,000, up from $3,500 for 2025. Under a change made in SECURE 2.0, a different catch-up limit applies for employees aged 50 and over who participate in certain applicable SIMPLE plans, which remains $3,850. Under a change made in SECURE 2.0, a higher catch-up contribution limit applies for employees aged 60, 61, 62 and 63 who participate in SIMPLE plans, which remains $5,250.