Trump Accounts are tax-deferred investment accounts proposed in the House-passed “One Big Beautiful Bill” for U.S. children born between January 1, 2025, and December 31, 2028. Originally called “money account for growth and advancement,” or “MAGA” savings accounts, the renamed accounts would be managed by banks or investment firms and operate like traditional investment accounts. The accounts will be available to U.S. citizen newborns whose parents have Social Security numbers and are authorized to work in the U.S.
- Initial Funding: The federal government provides a one-time $1,000 deposit per child, managed by a bank or financial institution.
- Contributions: Parents, family, or others can contribute up to $5,000 annually (adjusted for inflation) in after-tax dollars until the child turns 18.
- Investment: Funds must be invested in a diversified index fund tracking U.S. equities.
- Access:
- At age 18, up to half the account’s value can be withdrawn for approved purposes (higher education, job training, starting a small business, or a first home purchase). If the money is withdrawn for a non-qualified expense, it would be taxed as ordinary income and could be subject to a penalty.
- At age 25, the full balance can be accessed for qualified purposes. If the money is withdrawn for a non-qualified expense, it would be taxed as ordinary income and could be subject to a penalty.
- At age 31, the account terminates, and all funds are fully accessible for any purpose, taxed as capital gains.
- Taxation: Earnings grow tax-deferred. Withdrawals for qualified expenses are taxed at long-term capital gains rates; non-qualified withdrawals before age 30 incur penalties and are taxed as ordinary income.
- Administration: Parents can open accounts at banks or financial institutions. If not opened, the government auto-enrolls the child upon tax filing, with an opt-out option.
According to Speaker Mike Johnson, “If you have a 401(k), you understand the power of investing early for the future. Trump Accounts take that same principle and they apply it from the very beginning of Americans’ lives … It’s a bold, transformative policy that gives every eligible American child a financial head start from day one … Trump Accounts are all about setting up the next generation for success.”
While the program aims to promote early savings and wealth-building, it has drawn criticism for limited tax benefits compared to 529 plans, potential fees, and restrictive withdrawal rules that may disadvantage lower-income families. It awaits Senate approval and faces debate over its structure and cost, estimated at over $3 billion annually.
