Key Points
- The One Big Beautiful Bill creates "Trump Accounts," tax-advantaged savings accounts for children under age 8, with strict rules on contributions and distributions.
- A pilot program will provide $1,000 in seed money to qualifying newborns, with automatic accounts created by the Treasury for eligible children.
- The accounts are restricted to U.S. equity index fund investments and have age-based limitations and penalties to prevent misuse or duplication.
Editor's Note: See the most updated information on Trump Accounts here.
Congress moved forward with the plan to create a new tax-advantaged savings account called the "Trump Account," intended to help families with young children save for education, small business ownership, or first-time home purchases.
Previously called MAGA Accounts, the renamed proposal that passed in the "One Big Beautiful Bill" includes a $1,000 pilot contribution from the federal government for eligible newborns.
However, while the $1,000 baby bonus is a nice "gift", the account itself is not as beneficial as existing accounts, such as a 529 plan or UGMA/UTMA account.
Editor's Note: Here's the latest details on Trump Accounts and how to claim the $1,000 baby bonus.
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How A Trump Account Is Structured
Trump Accounts resemble a hybrid of 529 plans and custodial investment accounts. They can only be opened for children under age 8, and only one account per child is permitted. Parents or guardians can contribute up to $5,000 per year in after-tax dollars (which would rise with inflation), but contributions from government sources or qualified rollovers do not count against that cap.
Contributions must be made in cash and cannot begin until 2026.
Unlike a 529 plan, investment options are limited to regulated U.S. equity index funds with low fees and no leverage. These accounts are non-forfeitable and cannot be accessed until the beneficiary reaches age 18. Between ages 18 and 25, withdrawals are capped at 50% of the value at age 18, with exceptions for qualified education expenses, qualified credential programs, small business costs, and first-time home purchases.
Trump Account earnings used for qualified expenses are taxed as capital gains. Contributions themselves are not tax-deductible, but the accounts grow tax-free. Any other distributions are fully taxable as income and, for those under age 30, subject to an extra 10% penalty.
Here's a chart of how Trump accounts compare to existing plans:
$1,000 Baby Bonus Pilot Program
To launch the program, the bill authorizes the Department of the Treasury to establish accounts and automatically deposit $1,000 for every child born between January 1, 2025, and January 1, 2029, provided they are U.S. citizens. The Treasury will use tax return data to identify qualifying children and notify families, who can opt out if desired.
If no account exists for a qualifying child, the Treasury will open one and assign a default trustee.
This mirrors some aspects of the Obama-era "MyRA" program but introduces stricter oversight and a focus on long-term investing.
What Happens Next
Now that President Trump has signed the One Big Beautiful Bill into law, we're waiting on the Treasury Department to create the final rules so families can open an account (or claim their $1,000 baby bonus).
The account itself isn't that appealing though. A 529 plan or UGMA would do a better job without creating a new account type that families would have to manage and track. However, the $1,000 baby bonus is nice - and we'll never tell anyone to pass up free money.
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Editor: Colin Graves
Robert Farrington is the founder of The College Investor and is widely recognized as one of the nation’s leading voices on student loan debt and saving for college. He holds an MBA from UC San Diego Rady School of Management and has spent over 15 years researching, writing, and advising on student loans, 529 plans, financial aid programs, and saving and investing for young professionals.
Robert has been featured in the The New York Times, The Wall Street Journal, The Washington Post, NBC News, and Forbes, where he has been a regular personal finance contributor for over a decade. His work combines both professional expertise and personal experience – he successfully navigated his own student loan repayment journey and has helped thousands of readers do the same.
He is committed to making the intersection of personal finance and education transparent and accessible. You can learn more about Robert on the About Page or on his personal site RobertFarrington.com.