Why It Matters

Trump Accounts offer new tax-advantaged savings opportunities for children, but differences in citizenship, territorial tax systems and sources of income mean families across the five U.S. territories may not receive the same benefits.

A Congressional Research Service analysis of how Trump Accounts, established under the One Big Beautiful Bill Act, apply to residents of U.S. territories shows that differences in citizenship, territorial tax systems and sources of income could produce significantly different tax treatment and savings benefits for families across Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa and the Commonwealth of the Northern Mariana Islands.

Congress designed Trump Accounts as tax-advantaged savings vehicles for children, but their interaction with territorial tax systems creates significant differences for residents of U.S. territories. During a child's growth period before the calendar year in which the beneficiary turns 18, nonexempt contributions are generally limited to $5,000 annually, with employers able to contribute up to $2,500 per year tax-free.

The federal government also provides a one-time $1,000 contribution to the accounts of eligible children born from 2025 through 2028. That benefit is limited to U.S. citizens, meaning children born in American Samoa who are U.S. nationals but not otherwise U.S. citizens do not automatically qualify for the federal contribution.

The Big Picture

Four of the five inhabited territories apply the Internal Revenue Code as part of their local tax systems. Guam, the U.S. Virgin Islands and the Commonwealth of the Northern Mariana Islands operate mirror-code tax systems, while American Samoa has adopted much of the federal tax code as its territorial tax law. Puerto Rico operates its own income tax system separate from the federal code.

Territorial governments and their subdivisions cannot make qualified general contributions under current law. However, they can still contribute to Trump Accounts, though those payments would count against the annual $5,000 limit as ordinary contributions rather than qualified general contributions. State and local governments and Section 501(c)(3) tax-exempt organizations can make qualified general contributions if they provide equal amounts to each account beneficiary within a qualified class.

After the growth period ends, distributions generally follow traditional IRA rules. Pretax contributions, including employer and certain government contributions, generally become taxable as ordinary income upon withdrawal. Distributions before age 59½ may also face a 10 percent additional tax unless an exception applies, including certain distributions for higher education, a first home purchase of up to $10,000, birth or adoption expenses of up to $5,000 per child, or emergency personal expenses of up to $1,000 per year.

Residents can establish accounts on behalf of eligible individuals in the territories. After the growth period ends, beneficiaries may be able to deduct their own contributions under the rules applicable to traditional IRAs. The value of that federal deduction may be limited, however, for territorial residents with little or no income subject to U.S. federal income tax.

Contributions after the growth period are also generally constrained by the beneficiary's compensation for purposes of the federal IRA rules. For some territorial residents, differences between territorial-source and U.S.-source income can therefore affect how much they can contribute and the federal tax benefit they receive.

The $1,000 pilot contribution presents another territorial distinction. Federal law requires an eligible child to be a U.S. citizen, which generally includes children born in Puerto Rico, Guam, the U.S. Virgin Islands and the Northern Mariana Islands. People born in American Samoa are generally U.S. nationals rather than U.S. citizens at birth, meaning a child born there would not qualify solely on the basis of birth in the territory.

The law also contains a special rule for territories with mirror-code tax systems. The $1,000 pilot contribution provision is not automatically incorporated into the income tax laws of a mirror-code territory unless that territory elects to treat it as part of its tax system.

The Bottom Line

Residents of all five U.S. territories can establish Trump Accounts for eligible individuals, but the benefits can vary based on citizenship, territorial tax treatment and whether income is subject to U.S. federal income tax.

The separate $1,000 federal contribution is available only for qualifying children born from 2025 through 2028 who are U.S. citizens and meet the program's other requirements. That distinction is particularly important in American Samoa, where birth in the territory generally confers U.S. nationality rather than U.S. citizenship.

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