Can You Withdraw Trump Account Money for Medical Bills? (w/Examples) + FAQs

This article reflects federal rules as of June 2026 and covers tax year 2026. It also notes how states may treat these accounts. Tax law changes fast, and the IRS is still finalizing Trump Account rules — confirm current figures before you act.

Quick Answer

No — you cannot withdraw Trump Account money for medical bills before January 1 of the year the child turns 18. After 18, the account becomes a traditional IRA: medical withdrawals are allowed, but you pay income tax, and a 10% penalty applies unless a medical exception fits.

A Trump Account is a new kind of retirement account for children created by the 2025 One Big Beautiful Bill Act (OBBBA). It is locked tight during childhood, so a parent staring at a hospital bill cannot crack it open early — not for surgery, not for a NICU stay, not for anything but the child’s death or a rollover. That lock is the single most misunderstood feature of the account, and missing it can lead families to count on money they legally cannot touch.

The stakes are real. A 2024 KFF analysis found that about 14 million Americans owe more than $1,000 in medical debt, and many parents look at every account they own when a bill lands. Knowing which accounts are off-limits — and which exceptions exist after age 18 — protects you from a surprise tax bill and a wasted plan.

🔒 Why no withdrawal is allowed before the year the child turns 18, no matter the emergency.
🏥 How the account behaves like a traditional IRA after 18, and when medical bills waive the 10% penalty.
🧮 Worked dollar examples showing the exact tax and penalty on a medical withdrawal.
🗺️ Whether your state taxes the withdrawal on top of the federal tax.
✅ The exact steps, forms, and deadlines to claim a penalty exception the right way.

What a Trump Account Actually Is

A Trump Account is a tax-deferred savings account for a U.S. citizen child under age 18 who has a Social Security number, created under new Internal Revenue Code Section 530A. It is legally a traditional (pre-tax) IRA wrapped in special child-only rules. That single fact — that it is an IRA, not a health account — drives every withdrawal answer in this article.

Accounts can be opened starting July 4, 2026, and no contributions are allowed before that date, per IRS Notice 2025-68. A parent or guardian opens one using new IRS Form 4547 or through trumpaccounts.gov, though the form is not yet finalized and the website is not yet live. The consequence of this timing is simple: in mid-2026, no one has money in one of these accounts yet, so any “I need it for a medical bill today” question is really a planning question for the future.

Children born after December 31, 2024, and before January 1, 2029, can receive a one-time $1,000 federal seed contribution under the pilot program in Section 6434. Families and others can add up to $5,000 per year for 2026 and 2027 (indexed after that), and employers can add up to $2,500 per year under new Section 128. The common misconception here is that this is a flexible “kids’ fund” you can dip into — it is not. What you should do: treat any Trump Account dollar as locked until the year the child turns 18, and keep a separate emergency fund for medical costs.

The Core Rule: No Medical Withdrawals Before Age 18

During what the law calls the “growth period” — the years before January 1 of the year the child turns 18 — no distributions are permitted at all, except a qualified rollover to another Trump Account or a payout due to the child’s death, according to IRS guidance. There is no medical exception, no hardship exception, and no early-out for a sick child. The account cannot even be closed and paid out during these years.

This matters because medical emergencies do not wait. A parent facing a $20,000 surgery bill for a 9-year-old cannot withdraw a single dollar of the child’s Trump Account to pay it. The consequence of trying is that the trustee will simply refuse the request — the account documents forbid it — so you must look to other money: an HSA, a 529 (for education, not medical), savings, or a payment plan with the hospital.

The misconception that trips families up is treating a Trump Account like a Health Savings Account. An HSA is built for medical bills at any age; a Trump Account is a locked retirement vehicle for a minor. What you should do now: if your goal is to cover a child’s medical costs, fund an HSA (if you have a high-deductible health plan) or a regular savings account — never count on the Trump Account for childhood medical needs.

After Age 18: The Rules Flip to IRA Treatment

Starting January 1 of the year the child turns 18, the Trump Account can be paid to the now-adult beneficiary for any reason, including medical bills, per IRS Notice 2025-68. At that point the account is treated like a traditional, pre-tax IRA. This is the turning point where “Can I use it for medical bills?” finally becomes “Yes — but here is the tax cost.”

Because it is a traditional IRA, money coming out is generally taxable as ordinary income, except for any after-tax “basis” (contributions that were not government, charitable, or employer money). On top of income tax, a 10% early-withdrawal penalty applies before age 59½ unless an exception fits, as confirmed by Ameriprise’s account guide. The consequence of ignoring this is paying both tax and penalty on money you thought was “free.”

The good news is that traditional IRAs have built-in medical exceptions to the 10% penalty. The same exceptions apply here, since the account follows traditional-IRA rules. The misconception is that an exception makes the withdrawal tax-free — it does not. An exception only waives the 10% penalty; income tax on the pre-tax portion still applies. What to do: before withdrawing, separate the two costs in your head — income tax (almost always owed) and the 10% penalty (sometimes waived).

The Two Medical Penalty Exceptions, Explained

After age 18, two medical-related exceptions can erase the 10% early-withdrawal penalty on an IRA, and therefore on a Trump Account. Each is governed by IRS rules on the additional tax. Knowing which one fits decides how much you save.

Exception 1: Unreimbursed Medical Expenses Over 7.5% of AGI

This exception waives the 10% penalty on the part of an early withdrawal used for unreimbursed medical expenses that exceed 7.5% of your adjusted gross income (AGI) for the year, under IRS Topic No. 557. “Unreimbursed” means costs your insurance did not cover. The expenses and the withdrawal must happen in the same tax year.

The consequence of misjudging the 7.5% floor is that part of your withdrawal stays penalized. For example, if your AGI is $40,000, the floor is $3,000 — only medical costs above that line count toward the penalty waiver. A common misconception is that all medical bills qualify; in reality only the slice above 7.5% of AGI does. What to do: total your unreimbursed bills, subtract 7.5% of AGI, and only the remainder is the penalty-free amount — then report it on Form 5329.

Exception 2: Health Insurance Premiums While Unemployed

This exception waives the penalty on withdrawals used to pay health insurance premiums during a period of unemployment, under the IRA penalty exceptions. To qualify, you generally must have received unemployment compensation for 12 straight weeks, and the withdrawal must occur in the year you got that compensation or the following year.

The consequence of missing the timing rule is a penalty on premiums you thought were covered. A common misconception is that any job loss qualifies — but the 12-week unemployment-compensation test is strict. What to do: keep proof of your unemployment compensation and premium payments, and take the withdrawal within the allowed window. A third, separate exception waives the penalty if the beneficiary becomes totally and permanently disabled, which can also apply to large ongoing medical situations.

Which Situation Applies to You?

The right answer depends entirely on the child’s age and your role. Use the branches below to jump to your case.

You are a parent of a child under 18 — Stop here for withdrawals: nothing can come out for medical bills. Read “No Medical Withdrawals Before Age 18” and plan with an HSA or savings instead.
The beneficiary is 18 or older and has medical bills — The account is now an IRA. Read “After Age 18” and “The Two Medical Penalty Exceptions” to size your tax and penalty.
The beneficiary is 18+ and recently lost a job — Look at Exception 2 (unemployed health premiums) before Exception 1.
The beneficiary is disabled — The disability exception may waive the penalty regardless of the 7.5% floor.
The beneficiary is 59½ or older — No 10% penalty applies at all; only ordinary income tax is due on the pre-tax portion.

Worked Examples With Real Dollars

Below are full calculations so you can copy the math for your own numbers. All examples assume tax year 2026 and a beneficiary under 59½.

Example A — Sarah, age 19, $8,000 ER bill

Sarah withdraws $8,000 from her Trump Account to pay an emergency-room bill. Her AGI for the year is $30,000, so her 7.5% medical floor is $2,250. Her unreimbursed medical expenses are $8,000, so the amount above the floor is $8,000 − $2,250 = $5,750.

Income tax: All $8,000 is pre-tax money, so it is taxable. At a 12% bracket, that is about $960 in federal income tax.
10% penalty: Normally $800. But $5,750 qualifies for the medical exception, so the penalty applies only to $8,000 − $5,750 = $2,250, which is $225.
Total federal cost: roughly $960 + $225 = $1,185, instead of $960 + $800 = $1,760 without the exception.

Example B — Marcus, age 22, $4,000 in premiums while unemployed

Marcus lost his job, collected unemployment for 14 weeks, and withdraws $4,000 to pay health insurance premiums. Because he meets the 12-week unemployment test, the entire $4,000 qualifies for Exception 2.

Income tax: $4,000 is taxable at his 10% bracket = about $400.
10% penalty: $0, because the unemployed-premium exception covers all $4,000.
Total federal cost: about $400.

Example C — Dana, age 25, $10,000 withdrawal, only $1,000 medical

Dana takes out $10,000 but only $1,000 went to a doctor; the rest paid rent. Her AGI is $50,000, so her 7.5% floor is $3,750. Her $1,000 in medical costs is below the floor, so none of it qualifies for the exception.

Income tax: $10,000 taxable at 22% = about $2,200.
10% penalty: Full $1,000 ($10,000 × 10%), because no medical exception applies.
Total federal cost: about $3,200. The lesson: the exception protects only medical dollars above 7.5% of AGI.

Three Common Scenarios

These tables show the most frequent situations and what happens with each.

Parent wants money for a young child’s surgery

Your Move	What Happens
Request a withdrawal during the growth period	Trustee denies it; no distributions allowed before the year the child turns 18
Try to close the account early	Not permitted; the account cannot be paid out during childhood
Pay the bill from an HSA or savings instead	Works; this is the correct source for childhood medical costs

18-year-old beneficiary with large unreimbursed bills

Your Move	What Happens
Withdraw and ignore the exception	You owe income tax plus a full 10% penalty
Withdraw and claim the 7.5%-of-AGI exception on Form 5329	Penalty waived on the amount above the floor; income tax still due
Withdraw more than your medical costs	The extra is taxed and penalized normally

Unemployed beneficiary paying health premiums

Your Move	What Happens
Withdraw after 12 weeks of unemployment compensation	Premium amount escapes the 10% penalty
Withdraw before meeting the 12-week test	Penalty applies; timing rule not met
Use the money for non-premium costs	That portion is taxed and may be penalized

Named Mini-Scenarios

Lena and her newborn. Lena’s baby was born in March 2025 and qualifies for the $1,000 federal seed once accounts open in July 2026. When the baby needs surgery at age 4, Lena learns she cannot withdraw any Trump Account money — she uses her HSA instead and leaves the account to grow.

Tariq, age 18, first ER visit. Tariq turns 18 in 2026 and faces a $5,000 hospital bill. Because his withdrawal qualifies under the 7.5%-of-AGI exception, he avoids most of the 10% penalty but still reports the withdrawal as income on his tax return.

Priya, age 30, no exception. Priya withdraws $6,000 for a vacation, not medical care. She owes ordinary income tax plus the full 10% penalty, because no medical or other exception applies. Her case shows the account is meant for retirement, not casual spending.

Mistakes to Avoid

Assuming you can tap it for a child’s medical bill before 18. You cannot; the request will be denied and you will waste time you do not have during an emergency.
Confusing a Trump Account with an HSA. They are opposite tools; relying on the wrong one can leave a bill unpaid.
Thinking a penalty exception makes the withdrawal tax-free. Income tax on the pre-tax portion still applies, so you may owe more than expected at filing.
Withdrawing more than your qualifying medical costs. The excess is taxed and penalized, shrinking the money you keep.
Missing the 7.5%-of-AGI floor math. Only costs above the floor escape the penalty, so a small bill may qualify for nothing.
Failing to file Form 5329. Without it, the IRS assesses the full 10% penalty even when an exception applies.
Ignoring state tax. Some states tax the withdrawal on top of federal tax, raising your real cost.
Forgetting the unemployment timing rule. Withdrawing premiums before meeting the 12-week test triggers the penalty.

Does Your State Tax the Withdrawal?

Federal law sets the income tax and 10% penalty, but states do not automatically follow federal rules on new accounts. The federal answer is the starting point; your state answer can add cost on top.

In a no-income-tax state — such as Texas, Florida, Nevada, Washington, Wyoming, South Dakota, Alaska, Tennessee, or New Hampshire (which taxes only certain investment income) — there is generally no state tax on the withdrawal, so your only bill is federal. The consequence is a cleaner, cheaper withdrawal. What to do: confirm your state’s current rules, since residency at the time of withdrawal usually controls.

In a high-income-tax state — such as California, New York, or New Jersey — the taxable portion of the withdrawal is typically added to your state taxable income, and most states do not mirror the federal 10% penalty (penalties are usually federal only). The consequence is extra ordinary state income tax, sometimes 5%–13%. The misconception is that the federal penalty exception also waives state tax — it does not. What to do: check your state revenue agency’s treatment of IRA distributions, because Trump Accounts follow IRA rules.

Trump Account vs. HSA for Medical Bills

Feature	What It Means
Trump Account	Locked until the year the child turns 18; after that, taxable IRA withdrawals with possible penalty
HSA	Available at any age for qualified medical expenses, tax-free if used for medical care

The takeaway is that an HSA is the purpose-built tool for medical bills, while a Trump Account is a long-term retirement vehicle that only reaches medical use after adulthood and at a tax cost. For a deeper comparison, see HealthEquity’s overview of how the two differ.

Do’s and Don’ts

Do keep a separate emergency or HSA fund for childhood medical costs — because the Trump Account is legally off-limits until 18.
Do confirm the beneficiary’s exact age rule (the year they turn 18) — because the calendar year, not the birthday, opens access.
Do file Form 5329 to claim any penalty exception — because the IRS will not apply it automatically.
Do separate income tax from the penalty in your planning — because an exception only touches the penalty.
Do check your state’s tax treatment — because conformity varies and adds real cost.
Don’t promise yourself the money for a current medical bill — because the trustee will deny early access.
Don’t withdraw more than your qualifying expenses — because the extra is fully taxed and penalized.
Don’t assume disability or unemployment automatically qualifies — because each exception has strict tests.
Don’t skip records of medical bills and premiums — because you need proof if the IRS asks.
Don’t treat the account as a Roth — because it is pre-tax, so withdrawals are taxable.

Pros and Cons of Using It for Medical Bills

Pro: After 18, the money is fully available for any medical need — because IRA rules then allow withdrawals for any reason.
Pro: Medical exceptions can erase the 10% penalty — because traditional-IRA rules carry over.
Pro: No early-withdrawal scramble during childhood — because the lock forces the money to grow untouched.
Pro: Investments grow tax-deferred — because no tax is due until withdrawal.
Pro: A $1,000 federal seed plus growth can meaningfully offset a future adult medical bill — because compounding adds up over 18 years.
Con: No access at all before the year the child turns 18 — because the law bans childhood distributions.
Con: Withdrawals are taxed as ordinary income — because the account is pre-tax.
Con: A penalty can still apply if no exception fits — because the 10% rule is the default.
Con: Pulling money out shrinks retirement savings — because every dollar withdrawn stops compounding.
Con: State tax may add to the cost — because states often do not waive what the federal exception waives.

What to Do Next

Confirm the beneficiary’s age status. If the child is under 18, stop planning to use the account for medical bills and set up an HSA or savings fund instead.
If the beneficiary is 18+, total the medical costs and your AGI. Calculate 7.5% of AGI to find your penalty-free amount.
Gather records. Save unreimbursed medical bills, insurance statements, and any unemployment compensation proof.
Request only what you need from the trustee, and ask for the year-end Form 1099-R reporting the distribution.
File Form 5329 with your return to claim the medical penalty exception, and report the taxable income on your Form 1040.
Check your state’s rules with your state revenue department before you file.
Call a professional — a CPA or tax attorney — if the withdrawal is large, spans two tax years, or involves disability or an inherited account. This usually involves a one-time consultation to model the tax and confirm the exception.

This article is educational and not a substitute for advice from a licensed tax professional for your specific situation.

FAQs

Can I withdraw Trump Account money for a child’s medical bills before age 18?

No. During the growth period — the years before January 1 of the year the child turns 18 — no distributions are allowed except a qualified rollover or the child’s death. Use an HSA or savings instead for tax year 2026.

Can an 18-year-old use a Trump Account for medical expenses?

Yes. Starting January 1 of the year the beneficiary turns 18, withdrawals are allowed for any reason, including medical bills. The money is taxed as income, and a 10% penalty may apply unless an exception fits.

Does a medical withdrawal avoid all taxes?

No. A medical exception only waives the 10% early-withdrawal penalty. Income tax on the pre-tax portion still applies in tax year 2026, so plan for that bill at filing time.

How much of my medical costs escape the 10% penalty?

Only the amount above 7.5% of your AGI. If your AGI is $40,000, the first $3,000 of medical costs does not count; only unreimbursed expenses above that line qualify for the penalty waiver.

What form claims the medical penalty exception?

IRS Form 5329. You file it with your Form 1040 to report the early distribution and claim the exception. Without it, the IRS assesses the full 10% penalty automatically.

Does losing my job let me withdraw penalty-free for health premiums?

Yes, if you qualify. You generally must have received unemployment compensation for 12 straight weeks, and the withdrawal must pay health insurance premiums in that year or the next.

Is a Trump Account the same as an HSA for medical bills?

No. An HSA is built for medical costs at any age and is tax-free when used for care. A Trump Account is a locked traditional IRA that reaches medical use only after age 18 and is taxable.

Will my state tax a medical withdrawal?

It depends. No-income-tax states like Texas and Florida do not tax it. High-tax states like California and New York usually tax the taxable portion but do not add the federal 10% penalty.

What if the beneficiary is disabled?

The penalty may be waived. A separate IRA exception applies if the beneficiary is totally and permanently disabled, which can cover ongoing medical situations regardless of the 7.5%-of-AGI floor.

When can Trump Accounts first be opened?

July 4, 2026. No contributions are allowed before that date, and the $1,000 federal seed for children born 2025–2028 is deposited no earlier than July 4, 2026, after enrollment is verified.

Is the withdrawal money pre-tax or after-tax?

Mostly pre-tax. Government, charitable, and employer contributions create no basis, so they are fully taxable on withdrawal. Only contributions from family or others during the growth period create after-tax basis.

Can I close the account early to pay a bill?

No. The account cannot be closed and paid to the child during the growth period. The only childhood exits are a qualified rollover or a payout due to the child’s death.

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