Trump Account Warning

California will not conform to Internal Revenue Code (IRC) Section 530A so growth within a Trump Account will be taxable for California tax purposes and not tax-deferred until distribution as on the federal level. 

Employer contributions to a Trump Account will be taxed on the California level to the employee as if it were wages. 

California families should maintain two separate tax records for the same account. 

One should track federal treatment and the other the amount of California income tax paid on the growth in the account so it is not taxed again at withdrawal in the future.

The Franchise Tax Board (FTB) has said that the initial funding of $1,000 will not be subject to California income tax. 

So do Trump Accounts still make sense for Californians?

For most families with moderate income, the answer is yes.

The initial free $1,000 makes it worthwhile and it will still compound tax-deferred on the federal level. 

As the Trump Account is owned by the child, a younger child will have little or no income which would result in no California income tax being paid. 

However, as the account grows and the child gets older, this may change. 

Higher income families will want to do additional analysis to see if the Trump Account makes sense.   

As we get closer to the 2026 tax filing season, the FTB may issue additional guidance.