California Decides to Tax Trump Accounts-Here's What Families Need to Know

https://www.dailysignal.com/2026/03/01/gavin-newsoms-toddler-tax-will-
raid-kids-trump-accounts/

The California Franchise Tax Board announced that it will refuse to treat 
newly created Trump Accounts as tax-deferred accounts for state tax 
purposes.

In doing so, California is purposefully making it difficult for families 
to fully utilize Trump Accounts.

As the San Francisco Chronicle notes, this is a major break from the 
state’s normal practice regarding retirement accounts:

“[California] does automatically conform to most laws relating to 
retirement accounts such as IRAs, 401(k) plans and pensions. However, the 
Franchise Tax board has determined that even though the Trump Accounts are 
defined as a new type of IRA, the state does not conform to the section of 
the federal tax code that created them.”

This means earnings from Trump Accounts will be taxed by California in the 
year they are realized, not deferred until distributed as intended. 
Savings accounts intended to help children save and invests for their 
future will now be taxed to fund California’s spending.

When asked, Gov. Gavin Newsom’s office refused to answer if Newsom would 
support a law overriding the Franchise Tax Board’s decision and conform 
with federal tax law.

If the Franchise Tax Board refuse to conform to the new federal tax rules, 
California families will now pay taxes on their children’s investment 
earnings.

Months after Congress created federally tax-advantaged Trump Accounts to 
help young Americans start building wealth, California is positioning 
itself to turn a relatively simple pro-growth reform into a compliance 
nightmare.

How Trump Accounts Work
Trump Accounts are a new type of child-focused retirement investment 
vehicle created as part of the One Big Beautiful Bill Act (OBBA), signed 
into law by President Donald Trump on July 4, 2025.

Parents can open a Trump Account for any child under the age of 18. 
Additionally, every American child born between Jan. 1, 2025 and Dec. 31, 
2028 is eligible to receive a one-time $1,000 contribution from the 
Treasury Department that will be immediately invested in an index fund.

Parents are authorized to manage the accounts until the child reaches age 
18, at which point the account converts into a traditional IRA. Employers, 
nonprofits, and family members can contribute up to $5,000 to each Trump 
Account each year, with the employer contribution portion capped at 
$2,500. There is no cap on contributions from nonprofits. There is also no 
cap on contributions from state, local or tribal governments.

Americans for Tax Reform is tracking the announcements of companies 
providing contributions to children’s Trump Accounts. You can find the 
full list here.

Trump Accounts allow savings for children to grow tax deferred. Unless 
they live in California.

California Taxes Trump Accounts
California’s Franchise Tax Board has determined that Trump Accounts will 
not be tax-deferred accounts for state tax purposes. This means that 
California would tax earnings every single year as they are realized.

Worse, employer contributions to Trump Accounts would also be taxed as 
income to the employee for state taxes purposes. This means parents will 
be stuck paying taxes on their employer’s contributions, as if it were 
income, even though they are not the ultimate beneficiary of the Trump 
Account.

As Sandy Weiner, California editor for the tax information publisher 
Spidell Publishing, warns in the San Francisco Chronicle:

“Because these accounts belong to the child and not the parent, Weiner 
said that “kiddie tax” rules would apply for California taxes—but not 
federal. The kiddie tax applies to income from a minor’s investment 
account. A certain amount of investment earnings each year is tax free, an 
additional amount is taxed at the child’s rate and anything over that is 
taxed at the parent’s rate.”

Increased Paperwork Burden for California Families
Because California refuses to comply with the federal treatment of Trump 
Accounts, families will have to deal with the headache of maintaining two 
separate tax records for the same account.

One set would track contributions, earnings, and basis under federal law; 
the other would track California’s annual state taxes so they can avoid 
double taxation when these funds are inevitably withdrawn.

As San Francisco certified public accountant Richard Pon explains:

“The child will technically owe state income tax on their account earnings 
each year. Younger children probably won’t have enough income to have to 
pay tax or file a tax return. But they should record the taxable 
contributions and income earned each year that added to their California 
basis in the account, which will reduce their state taxes when they 
withdraw the money, but only if they track it.”

California should conform state tax law to federal treatment. Anything 
less is a penalty on newborn savers; a toddler tax that punishes working 
families for participating in Trump Accounts.

California’s families and their children deserve better.

Editor’s Note: This story, including the headline and photo, were updated 
after publication to accurately reflect the decision of California’s 
Franchise Tax Board, not Gov. Gavin Newsom.


-- 
November 5, 2024 - Congratulations President Donald Trump.  We look 
forward to America being great again.

We live in a time where intelligent people are being silenced so that 
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Every day is an IQ test. Some pass, some, not so much.

Thank you for cleaning up the disasters of the 2008-2017, 2020-2024 Obama 
/ Biden / Harris fiascos, President Trump.

Under Barack Obama's leadership, the United States of America became the 
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queer liberal democrat donors.