Family tax planning is changing across the Great Lakes State this summer. Following the passage of the One Big Beautiful Bill Act, known as the OBBBA, last July, the federal government is opening a brand-new savings vehicle for young children. With the Trump accounts launch in July 2026, Michigan parents now have a narrow, time-sensitive window to lock in a real financial head start for their kids. Funding opens on July 4, 2026, which makes this month the moment to understand how the accounts work, who qualifies, and how to claim your child’s seed deposit. Getting it right means coordinating a federal program with Michigan’s own tax rules, and that is exactly the kind of planning an experienced Michigan tax attorney helps families handle.
For many parents, keeping up with shifting tax law while saving for the future feels like a second job. This launch is more than a routine policy update. It is a new tool for building wealth one generation at a time, and the families who act early will be the ones who avoid the backlog. At Levy & Associates, our team of certified public accountants, licensed Michigan attorneys, and former IRS revenue officers is tracking this rollout closely so we can give families accurate, current guidance.
The program comes directly from the federal tax package signed into law on July 4, 2025. At its core, a Trump Account is a new kind of tax-advantaged savings account for children, structured as a custodial traditional IRA that an adult manages on the child’s behalf. For eligible children, the U.S. Treasury makes a one-time $1,000 federal seed contribution to get the account started.
It is important to be precise about the tax treatment because this is where a lot of early coverage gets it wrong. The money inside a Trump Account grows tax-deferred, not tax-free. That is the same way a traditional IRA works. Earnings are not taxed year to year while they compound, but withdrawals are taxed as ordinary income later on. The $1,000 government seed and certain other contributions are taxable when the funds come out. The point is still powerful, since decades of tax-deferred compounding can turn a modest start into a meaningful sum. It just is not a tax-free account, and saying so on paper invites trouble.
By law, the funds must be invested in a low-cost, broadly diversified U.S. stock index fund, with annual fees capped at 0.10 percent and no leverage allowed. The account stays under guardian control during what the IRS calls the growth period, which runs until the year the child turns 18. At that point the account is generally treated like a standard traditional IRA.
There are two separate questions here, and mixing them up is the most common mistake parents make.
First, who can have a Trump account? Any child under age 18 who is a U.S. citizen with a valid Social Security number can have one opened on their behalf. Second, who gets the $1,000 federal seed? That is limited to children born between January 1, 2025, and December 31, 2028, who are U.S. citizens with a valid Social Security number and at least one parent who has an SSN or ITIN.
So if your child was born last year or arrives any time before the end of 2028, the seed is on the table. If your child was born in 2024 or earlier, you can still open a Trump Account and use it as a savings tool, but the federal government will not add the $1,000. The law does not apply retroactively to older siblings. Only one funded account is allowed per child, and the law sets a priority order for who may open it: legal guardian first, then a parent, then an adult sibling, then a grandparent.
This is the part the rush will hinge on, so here is the actual process rather than a vague promise that a portal will appear.
To establish the account and claim the seed, an eligible parent or guardian files IRS Form 4547, the Trump Account election form, with the child’s 2025 tax return. The election can also be made through an online account at trumpaccounts.gov beginning in mid-2026. After the election is made, the Treasury or its agent begins sending account activation information starting in May 2026, and you complete an identity verification step to finish opening the account. Contributions cannot be made until July 4, 2026. The Treasury has also released an official Trump Accounts app, built with Bank of New York Mellon and Robinhood, that families use to check seed status and manage the account once it is live.
The takeaway for July is simple. If you have not already filed Form 4547, do it, and watch for the activation notice. Filing early is the cleanest way to get ahead of the verification and processing volume that millions of new accounts will create.
Families and others can contribute up to a combined $5,000 per year per child during the growth period, a figure that will be indexed for inflation after 2027. That total is lower than the regular traditional IRA limit, which is $7,500 in 2026. The important wrinkle is that the contributions are not limited to the child’s own earnings, so saving is possible even though a baby has no income.
Several sources can pitch in toward that $5,000. Parents, grandparents, and other relatives can contribute, and so can employers, who may add up to $2,500 tax-free for an employee’s child. The government seed and certain qualified contributions from charitable organizations do not count against the $5,000 cap. One planning note for higher-net-worth families: individual contributions are treated as gifts for federal gift tax purposes, and the annual gift tax exclusion is $19,000 per recipient in 2026.
On the back end, remember the traditional IRA logic. No withdrawals are allowed before the child turns 18, apart from narrow exceptions such as a rollover to another Trump Account, a rollover to an ABLE account in the year the child turns 17, or distribution upon the child’s death. After 18, normal IRA withdrawal rules apply, and distributions are taxed as ordinary income.
A question we hear constantly from local families is how this new account stacks up against a Michigan 529 plan. They both help you save for a child, but they work under very different rules. The short version is that they are complements, not competitors. Many Michigan families will use both, and it is worth reviewing the tax benefits of a Michigan 529 plan before you decide how to split your savings.
The plain-English summary: the 529 gives you a Michigan income tax deduction now and tax-free growth for education, while the Trump Account hands you a free $1,000 head start and broader long-term flexibility. Used together, they cover both college and the wider financial runway.
The accounts themselves are federal, but Michigan’s tax rules sit on top of your household finances, and 2026 brought real changes for business owners. Michigan applies a flat 4.25 percent individual income tax, so every income source matters when you plan.
More importantly, Michigan decoupled from several of the OBBBA’s most generous business provisions when Governor Whitmer signed Public Act 24 in October 2025. While the federal government permanently restored 100 percent bonus depreciation, Michigan did not follow. For individual and pass-through filers, Michigan keeps the old federal phase-down schedule frozen in place, which means 20 percent bonus depreciation for 2026 and zero percent in 2027. Corporate filers get no bonus depreciation at all and must add it back. Michigan also froze Section 179 expensing at the pre-OBBBA limits rather than adopting the higher federal caps.
There is a friendlier side to the same law. Michigan now conforms to the federal treatment of tips and overtime for tax years 2026 through 2028, and it created a three-tier system for taxing retirement income over the same window. For a self-employed parent juggling business write-offs and family savings this summer, the practical message is that your federal and Michigan returns will not line up automatically. The gaps need to be planned for, not discovered at filing time.
The following is an illustrative example only and does not reflect any specific client.
Consider Sarah and Mike Miller, a married couple in Troy. Their daughter, Chloe, was born in November 2025. Mike runs a small manufacturing consulting firm in Warren, and Sarah works as an accountant.
Because Chloe was born inside the 2025 to 2028 window, she is eligible for the $1,000 federal seed. The Millers file Form 4547 with their 2025 return, watch for the Treasury activation notice, and finish opening Chloe’s account so the seed lands once funding opens on July 4. On the business side, Mike’s firm runs through his personal return as a pass-through, so his Michigan bonus depreciation is capped at 20 percent for 2026 even though the federal rate is 100 percent. The Millers work with their tax team to time equipment purchases and align the business deductions with their family savings, all while managing their flat 4.25 percent Michigan exposure. By locking in Chloe’s seed early and planning the depreciation gap deliberately, they capture the federal benefit without a state surprise.
Prior results do not guarantee a similar outcome.
There is a timing reason to move now that has nothing to do with the calendar. The Internal Revenue Service is operating with a much smaller workforce than it had a year ago. The agency’s headcount has fallen from roughly 102,000 employees to under 76,000, a reduction of about 26 percent. That touches every part of tax administration, and resolution timelines for many collection and processing matters have stretched as a result. With millions of new family accounts entering the system at once, bottlenecks are likely. Filing your election early and verifying your account promptly is the safest way to keep your child’s seed from getting stuck behind the crowd.
Coordinating a new federal program with Michigan Department of Treasury rules is genuinely complicated, and small timing choices can cost real money. At Levy & Associates, our team includes certified public accountants, licensed Michigan attorneys, and former IRS revenue officers who understand tax administration from the inside. We provide mid-year tax resolution and planning to help you line up federal programs with state requirements, whether that means adjusting business withholding, managing Michigan compliance, or handling tax audits. From our main office in Lathrup Village, we serve families and businesses across Michigan, working to protect your wealth and your children’s financial future.
Please note that Levy & Associates focuses strictly on civil tax matters and does not represent clients in criminal tax matters.
Funding opens on July 4, 2026. You can make the election to open the account now by filing IRS Form 4547 with your 2025 return, and the Treasury begins sending account activation information starting in May 2026. Apply as early as you can to avoid delays.
Yes. The two work well together. The Trump Account provides a government-funded seed and broad long-term flexibility, while a Michigan 529 plan lets you save for college with a state income tax deduction and tax-free qualified withdrawals.
No. A Trump Account is a traditional IRA-style account, so the money grows tax-deferred and is taxed as ordinary income when withdrawn. The $1,000 seed and certain other contributions are taxable at withdrawal. The advantage is decades of tax-deferred compounding, not tax-free growth.
A child born in 2024 or earlier can still have a Trump Account opened but will not receive the $1,000 federal seed. The seed is limited to U.S. citizen children born between January 1, 2025, and December 31, 2028.
Disputes over Michigan income or business tax are handled by the Michigan Tax Tribunal, not the United States Tax Court. Federal matters, including the new savings accounts, stay under the jurisdiction of the IRS.
If you have questions about how these new accounts fit with your personal or business taxes, the team at Levy & Associates is ready to help. Many of us worked on the IRS side of these cases, so we know how the system works from both directions. Call us at (877) 500-4930 or contact us online for a free consultation.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.