The 2025 legislation, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”), established a new form of individual retirement accounts (“IRAs”) for individuals under 18 (“Child IRAs”). On December 2, 2025, the IRS published Notice 2025-68 (the “Notice”), describing the mechanics of these Child IRAs and announcing its intent to publish proposed regulations.

Child IRAs will function similarly to traditional IRAs, allowing tax deferral on earnings. However, through January 1^st of the year of the beneficiary’s 18th birthday (the “growth period”), Child IRAs will be subject to a different set of tax rules and requirements than traditional IRAs. Namely, during the growth period, distributions will be restricted, contributions will be subject to a separate and different contribution limit from a child’s other IRAs (if any), and the account will be permitted to only invest in “eligible investments,” i.e., low fee mutual funds and ETFs that do not use leverage and track qualified indexes such as the S&P 500.

Various Child IRA features, as clarified by the Notice, include:

• Child IRAs for children born during 2025 through 2028 will be eligible for a one-time $1,000 payment from the government;
• Assuming employer participation, an employee can contribute up to $2,500 (adjusted for inflation) of pre-tax income to a Child IRA;
• Annual contributions up to $5,000 (adjusted for inflation and excluding the $1,000 government payment) may be made;
• Distributions of pre-tax amounts (e.g., the $1,000 government payment and earnings) would be taxable to the beneficiary upon distribution at the individual’s then-applicable ordinary income tax rate, but distributions of post-tax contributions would not be taxable to the beneficiary; and
• The written governing instrument for a Child IRA must (i) designate it as a Child IRA, (ii) provide that no contributions will be accepted before July 4, 2026, and (iii) restrict distributions and require only “eligible investments” during the growth period.