Trump's $1,000 Accounts for Children: Tax Rules Explained

Under President Donald Trump's One Big Beautiful Bill Act, babies born in the U.S. between 2025 and 2028 will receive $1,000 from the federal government deposited into newly created Trump Accounts. Trump Accounts are designed to help families save and invest money for a child's future from the earliest years of life. Once created, these accounts can be funded with up to $5,000 in after-tax contributions each year from parents, grandparents, other relatives, or family friends. Employers can also contribute at a maximum of $2,500 per year per child. Employers' contributions are not counted as taxable income for the parent, and companies could deduct them as a business expense. Withdrawals generally aren't allowed until the child turns 18. If funds are withdrawn before age 18, or for non-qualified expenses at any age before age 30, the amount will be taxed as ordinary income and may be hit with a 10% penalty. Between the ages of 18 and 25, the account holder can access up to half the account balance for certain approved purposes, including college tuition and fees, job training programs, costs related to starting a small business, or buying a first home. Qualified withdrawals are taxed at long-term capital gains rates, typically 15 to 20%. When the account holder turns 31, any remaining balance is treated as if it's fully withdrawn. Those funds are taxed as ordinary income, but there's no additional penalty once the account automatically closes at that age.