Some states plan to tax Trump accounts for kids despite federal benefits

Trump accounts offer federal tax advantages, but several states intend to tax the earnings annually.

Published on Feb. 27, 2026

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The White House has introduced 'Trump accounts' as a new way for U.S. children under 18 to grow a nest egg, with preferential federal tax treatment. However, several states including California and Hawaii plan to tax the annual earnings in these accounts, despite the federal tax benefits.

Why it matters

The Trump accounts were designed to provide tax-advantaged savings for children, but the lack of state-level tax exemptions in many areas could undermine their appeal and adoption. This highlights the complexities of implementing a new federal program that interacts with varying state tax laws.

The details

The Trump accounts, created through last year's tax law, are available starting in July 2026 to any U.S. citizen under 18 whose parents opt in. They offer federal tax advantages, but seven states - California, Hawaii, Kentucky, Massachusetts, Pennsylvania, South Carolina, and Wisconsin - plan to tax the annual earnings under existing state laws. Some other states are considering legislation to exempt the accounts from state taxes, while a few have said the accounts will not be taxed annually.

  • The Trump accounts will be available starting in July 2026.
  • The U.S. Treasury will offer a $1,000 pilot contribution for children born between January 1, 2025 and December 31, 2028.

The players

Trump accounts

A new federal program that offers tax-advantaged savings accounts for U.S. children under 18.

California

The most populous U.S. state, which plans to tax earnings in Trump accounts annually.

Hawaii

Another state that intends to tax the earnings in Trump accounts on an annual basis.

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What they’re saying

“People are going to love this. It can quietly become the largest individual cash-transfer program we have in the United States.”

— Amira Boland, Chief of Staff, New America's New Practice Lab (idahobusinessreview.com)

“If my child's Trump account was funded by this $1,000 pilot contribution and nobody else ever puts any money into the account, odds are it's not going to rise to enough income' that it poses a tax problem. It could be more of an issue if you have family members or other people contributing to fund the Trump account.”

— Brian Schultz, Accountant specializing in ultrarich households (idahobusinessreview.com)

What’s next

Several states are considering legislation to exempt the Trump accounts from state-level taxes, which could help boost adoption of the program.

The takeaway

The Trump accounts for children offer federal tax advantages, but the lack of consistent state-level tax treatment could limit their appeal and effectiveness as a tool for building wealth, especially for families in states that plan to tax the annual earnings.