I've been a CPA for nearly 20 years - serving private small business and real estate the entire time. I take the lessons learned in serving and now running a small business and share them here. For business owners, investors, and advisors looking to lower their cost of capital, subscribe for delivery straight to your inbox ๐ Also on YouTube at PlugAccountingandTax!
The New Trump (Retirement) Accounts Small Business Angle ๐
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If you can get past the absurdity of the name ๐, the new Trump Accounts are worth looking into for those in the gifting stage of life. While this newsletter is geared towards small business and real estate, reducing tax burn to the ultimate taxpayer is the end game - and since this new gifting ๐ account has a business component, it's fair game. So let's talk Trump Accounts ๐คฆ We'll cover a few pieces of it:
What are Trump AccountsThey're a unique type of retirement account for the benefit of children under the age of 18. ๐จโ๐ผ These did not exist prior to the One Big Beautiful Bill that was passed in July 2025. Every year (starting next year, 2026!), each child is allowed to have contributions made on their behalf to a Trump Account not more than $5,000. This contribution must be kept in mutual funds or ETFs (no reinvestment into your real estate deals), but acts like a tax deferred account for the gains (there will be gains, right?). This $5,000 annual limit per child eats away from the annual gifting exclusion. But is a unique opportunity to set up generational wealth. ๐ซ Think of it like an IRA for your child - without needing them to earn income. The contribution is non-deductible (generally) but the gains are tax deferred until distributed. โป๏ธ Also worth noting that children born between 2025 and 2028 are eligible for a non-taxable government grant of $1,000 into their Trump Account. ๐ฆ That's free money. The trick is the money is untouchable before the age of 18 - after which withdrawals can be made subject to a 10% penalty (unless it's for qualified education expenses or a first home) like a traditional IRA. Upon retirement age, distributions of gains and tax-free contributions are taxable while distributions of after-tax contributions are not taxable. How Most People Will Use themIf you have a newborn, register for the Trump Account - don't leave $1,000 on the table. ๐ธ But most people will be attracted to the ability to contribute $5,000 annually per child - or grandchild. This contribution grows tax-free and later converted into an IRA owned by the adult child as a jump start into savings. If you're saving enough money to contribute to a 529 plan and then some, this is a great option to consider further getting your next generation a head start. ๐ For example, if your child is 5 years old and you contribute $5,000 to their Trump Account every year until 18, that's 13 years of contributions or $65,000. But at a conservative 5% annual tax-deferred growth rate, that's $93,000 by the time they're 18. And if left untouched until age 30, it grows to $175,000 at that same rate. โคต๏ธ How Business Owners Can Use ThemWhile contributions made by parents / grandparents / family isn't tax deductible, amounts up to $2,500 per child ARE TAX DEDUCTIBLE TO BUSINESSES. ๐ ๐ ๐ This $2,500 counts towards the annual $5,000 limitation per child and would represent income to them when distributed later. But this represents an attractive opportunity and incentive for employers to deduct unique benefits and incentivize key employees. For parents who own businesses and employ their minor children, this is a new way to get a larger deduction while paying no tax. ๐ Since it's not included as taxable income to the child, it increases the amount of deduction that can be taken while driving no additional tax to the family unit. Remember that ๐ only sole proprietorships and partnerships with both parents as partners are eligible to pay children with no FICA or FUTA. S-Corps, C-Corps, or partnerships with only one parent don't get the FICA and FUTA exemption. The TakeawayPolitics aside, many high net worth business owners and investors should take this opportunity to further their family's estate planning. And with some clever structuring and legitimate family labor, this estate planning can be tax deductible. There are some nuances to the accounts and investments, and we will likely still get clarifying regulations before it kicks off summer 2026, so talk to an investment professional before making any decisions. โ ๐ซก ๐ฅ Hottest Finance Posts This Week ๐ฅ
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The Plug [Newsletter]
I've been a CPA for nearly 20 years - serving private small business and real estate the entire time. I take the lessons learned in serving and now running a small business and share them here. For business owners, investors, and advisors looking to lower their cost of capital, subscribe for delivery straight to your inbox ๐ Also on YouTube at PlugAccountingandTax!
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