President Donald Trump has introduced a new initiative called “Trump Accounts,” offering a $1,000 savings account for every newborn in the United States. This program, part of a larger tax bill, aims to give young Americans a financial head start. The accounts, previously known as “MAGA Accounts” or “Money Accounts for Growth and Advancement,” will be automatically opened by the Department of the Treasury for children born between January 1, 2025, and January 1, 2029.
Each account will receive an initial $1,000 deposit from the federal government. Parents and family members can contribute up to $5,000 annually. The funds in these accounts will grow tax-deferred, with qualified withdrawals taxed at the long-term capital gains rate. These withdrawals can be used for educational expenses, purchasing a first home, or starting a business.
According to CNBC, the accounts are designed to function similarly to custodial brokerage accounts, with funds invested and subject to market fluctuations. Unlike 529 plans, which offer tax-free withdrawals for educational expenses, Trump Accounts will still incur taxes on earnings, even for qualified uses.
The accounts will be tied up until the account holder turns 18, at which point they can withdraw up to 50% of the funds for qualified expenses. At age 25, they can access the full balance for the same purposes, and after age 30, the funds can be withdrawn for any reason.
The tax bill, including the Trump Accounts, has passed the House of Representatives but still faces potential revisions in the Senate. Republicans hope to deliver the bill to President Trump by July 4, despite concerns about its impact on the federal deficit.
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