Basis (Trump Account)

Because Section 530A Trump Accounts are tax-deferred rather than tax-free, withdrawals are taxed on a pro-rata basis. Only the portion of the fund representing after-tax individual contributions (made by parents, relatives, or friends) represents 'basis' and is distributed tax-free. The government seed money, employer matching contributions, and all accumulated growth are non-basis and fully taxable.

Real-World Example If parents contribute $20,000 of after-tax money to their child's Trump Account over 18 years, and the account grows to $100,000 at retirement, the tax basis is $20,000. When withdrawing funds, the $20,000 is distributed 100% tax-free, while the remaining $80,000 is subject to ordinary income tax.