The Treasury Department issued proposed regulations on Aug. 24 defining eligible investments for Trump Accounts, a new tax-advantaged savings vehicle for children created under the Working Families Tax Cuts Act.
Trump Accounts are designed to allow families to begin saving for their children’s future at birth, with tax-deferred or tax-advantaged growth. The proposed rules specify eligible investment types, contribution limits and the tax treatment of account distributions, according to Treasury’s announcement.
The accounts represent one of the signature domestic economic initiatives of the current Congress and the Trump administration. The Working Families Tax Cuts Act established the accounts as part of a broader package of tax changes aimed at middle-class and working families.
The proposed regulations will directly shape how financial institutions, investment advisers and families design and use these new savings vehicles. Eligible investment types — whether limited to conservative options like savings bonds and money market funds or expanded to include equities and mutual funds — will significantly affect the accounts’ long-term growth potential.
A public comment period is open for the proposed regulations, allowing financial institutions, consumer advocates, tax professionals and the public to weigh in before final rules are issued.
The accounts’ accessibility to working- and middle-class families will depend on factors including minimum contribution requirements, account opening procedures and the availability of low-cost investment options. Child savings account programs at the state level have shown that automatic enrollment and simplified processes significantly increase participation among lower-income families.
Major financial institutions including Fidelity Investments and Vanguard are expected to develop Trump Account products once final regulations are issued. The Investment Company Institute, which represents the mutual fund industry, is expected to submit detailed comments on investment eligibility provisions.
The IRS will be responsible for administering the tax provisions associated with the accounts.