Trump Accounts - A Hot New Bombshell Enters the Tax-Advantaged Account Villa
Summer of 2025 brought us the new season of the hit TV show, Love Island. When a new contestant arrives on this popular reality dating show, its viewers know that “another hot bombshell has entered the villa.” The summer of 2025 has also brought us the One Big Beautiful Bill Act (OBBA) and, with the new law’s arrival, another hot bombshell enters the tax-advantaged account villa. Trump Accounts now join the ranks of the many ways Americans can save using individual accounts.
Tax Advantaged Accounts
There was a time when jobs offered pensions and health insurance with little or no out-of-pocket expenses. College tuition could be paid with earnings from a summer job. Those days are gone, and more and more Americans are finding themselves on their own to save and pay for things that previous generations were lucky enough to have at little to no cost.
Congress’s response has been to create tax advantaged accounts. These accounts can help those who can afford to make contributions, and there are now many different options available.
IRAs: Traditional IRAs are the original individual account. These retirement savings accounts offer a tax deduction for contributions for some and tax deferral of earnings for everyone. Anyone with taxable compensation can contribute to an IRA. There is no employer involvement needed.
Roth IRAs: Since 1997, Roth IRAs have offered an alternative to traditional IRAs for retirement savings. These accounts (which also require earned income to contribute) do not offer any tax deduction, but the trade-off is tax-free earnings in the future.
529 Plans: These are savings plans operated to make it easier to save for educational expenses. Earnings are not subject to federal tax and generally not subject to state tax when used for the qualified education expenses of the designated beneficiary.
ESAs: Education Savings Accounts (ESAs) are also for saving for education. They are individual accounts, like IRAs, and can be used for a broad range of both K-12 and post-high school education expenses. Earnings are tax-free if used for education.
HSAs: For those with high-deductible health insurance, contributing to a Health Savings Accounts (HSAs) can help with health care expenses. Contributions to HSAs are deductible regardless of income level and any distributions used for qualified health expenses are tax-free.
ABLE Accounts: Achieving a Better Life Experience (ABLE) accounts allow eligible people with disabilities to save money in a tax-advantaged account without jeopardizing their eligibility for certain public benefits programs. Earnings in the account grow tax-deferred and are tax-free if used for qualified disability expenses.
Another hot bombshell has entered the villa! Trump Accounts: Effective July 4, 2026, parents and others can contribute up to a total of $5,000 per year on behalf of a child. Contributions by employers and nonprofits are also permitted. Accounts for babies born between January 1, 2025, and December 31, 2028, will be seeded with a one-time government contribution of $1,000. Earnings are tax-deferred until distribution.
By Sarah Brenner, JD
Director of Retirement Education
Ed Slott and Company, LLC
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If you have any of these tax-advantaged accounts and want them to play a part in your financial plan, click here to schedule a complimentary 20-minute Q&A with a licensed financial advisor.
Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.
