The Internal Revenue Service has released detailed guidance on the Working Families Tax Cuts, a legislative package that introduces significant changes to federal tax credits, deductions, and savings vehicles. Among the most distinctive provisions is the creation of Trump Accounts, a new category of tax-advantaged investment accounts for children that will receive direct federal contributions.
Under Section 70204 of the legislation, parents, guardians, or other parties can establish Trump Accounts for eligible children. The federal government will make a one-time contribution of $1,000 to each eligible child's account, though the accounts cannot be funded before July 4, 2026. According to IRS news release IR-2026-42, four million children have already been signed up for Trump Accounts, with one million claiming the $1,000 pilot program contribution.
The accounts permit authorized contributions from individuals and employers up to $5,000 per year. Employers can contribute up to $2,500 annually toward an employee's or dependent's Trump Account without the contribution counting as taxable income for the employee. Funds must be invested in certain mutual funds or exchange-traded funds that track a U.S. stock index such as the S&P 500.
Money in Trump Accounts generally cannot be withdrawn before the year the child turns eighteen. After that point, the account is treated like a traditional IRA with similar tax rules. The IRS has indicated that taxpayers can now view and submit Trump Account elections through their IRS Individual Account portal, according to news release IR-2026-68.
The legislation also expands access to Health Savings Accounts through multiple provisions under Section 71307. Starting with plan years beginning on or after January 1, 2025, telehealth and other remote care services can be received before meeting a high-deductible health plan deductible, and people can still contribute to their HSA even after using telehealth before meeting the deductible. This rule is permanent.
Beginning January 1, 2026, bronze and catastrophic health insurance plans are treated as HSA-compatible, regardless of whether the plans are purchased through an insurance exchange. This change makes more people eligible to contribute to an HSA, including individuals who previously could not because their plan did not meet the strict high-deductible health plan definition. Additionally, people enrolled in certain direct primary care service arrangements may contribute to an HSA if they otherwise qualify and can use HSA funds tax-free to pay periodic direct primary care fees.
For businesses, the legislation introduces a Qualified Production Property deduction under Section 70307 that allows accelerated write-offs. For most qualifying business property bought and put into use after January 19, 2025, businesses can deduct 100 percent of the cost in the first year rather than spreading the deduction over several years. This change primarily benefits businesses purchasing equipment, machinery, certain plants, and other qualifying business property.
The Working Families Tax Cuts also modifies the Adoption Credit under Section 70402. Beginning with tax years after December 31, 2024, up to $5,000 of the adoption credit may be refundable, indexed for inflation. Any credit amount carried forward from prior years cannot be used to calculate the refundable portion.
Changes to the Premium Tax Credit appear in Sections 71301 through 71305, including removal of limitations on repayment of excess advance payment of the premium tax credit for tax years beginning after December 31, 2025, and elimination of certain Premium Tax Credit rules that no longer apply after tax years 2020 and 2021. The IRS has updated frequently asked questions on the Premium Tax Credit, detailed in news release IR-2025-127.
The IRS has also provided transitional relief for tax year 2025 under Section 70203 for lenders and other recipients of qualified interest who must file information returns showing the total amount of interest received on qualified passenger vehicle loans. Lenders and other payors should refer to Notice 2025-57 for guidance on how the 2025 reporting rules apply, according to IRS news release IR-2025-105.