The Trump administration has already implemented a new reform. This time, it aims to provide $1,000 to each newborn child who is a US citizen and has a valid Social Security number, with no income limits for eligibility. This is specified in what was initially called the MAGA Account, but which ultimately appears to be called the Trump Account.
‘MAGA Account’: as it’s the name of Trump’s political movement, it was dismissed
According to the government, this is a savings account to ensure the academic future of newborns. Initially, as mentioned above, it was going to be called the MAGA Account, apparently because the acronym stands for Money, Account, Grow, and Advance. But for obvious reasons, as it’s the name of Trump’s political movement, it was dismissed.
Under the bill, children born between January 1, 2025, and January 1, 2029, would receive the money, which would be invested on their behalf in the stock markets. Both parents and interested third parties could deposit money into the children’s accounts. When they grow up, they could withdraw the earnings to pay for certain expenses, such as attending college or buying a home. In fact, up to $2,500 per year could come from tax-free contributions from the parents’ employer, and the total allowable contributions per year is $5,000.
Born between January 1 and December 31, 2028 and must be a citizen of the United States
Therefore, to review the requirements that this new law will implement, it is important that the newborn was born between January 1 and December 31, 2028; they must be a citizen of the United States; and finally, they must have a valid Social Security number.
While the benefit of the government’s initial $1,000 investment is clear, the accounts have puzzled tax experts. Individuals could only contribute income that had already been taxed into the accounts, and the accounts’ earnings would also be taxed when the money was withdrawn. This would appear to make the “Trump account” function like a typical investment account, rather than a tax-advantaged one.
The income in these accounts will grow tax-free
The measure is part of the new Invest America Act, recently approved by the US Congress and will be implemented starting July 4, 2026. That is the expected date for the automatic deposit of $1,000, courtesy of the federal government, to be made to every newborn starting in 2025. In addition to this, it is relevant to add that any minor under 18 years of age who was born before 2025 will be able to access the benefit of opening an account, although the initial deposit of $1,000 dollars will not be made.
Starting at age 30, the money can be used for any purpose
The income in these accounts will grow tax-free until the beneficiary begins withdrawing. Starting at age 18, the account holder may make partial withdrawals, but only for uses considered “qualified,” such as paying for college, starting a business, or purchasing a first home. Starting at age 25, the full amount can be accessed, provided it is for the same purposes.
Finally, starting at age 30, the money can be used for any purpose, but if it’s not used for qualified purposes, the earnings will be taxed as ordinary income, meaning at a higher rate than capital gains.
Starting earlier means saving more. The government’s message is that this is a very important way to help you manage a responsible financial life as your newborn grows.
