Wealth Creation Program for Newborns Proposed

Recently, the US government introduced a program aimed at wealth creation for children born during President Donald Trump’s second term. The proposal includes funding “money accounts for growth and progress,” referred to as “MAGA accounts.”

A notable development occurred when House Republicans submitted an amendment to remove the “MAGA” acronym. As a result, a $1,000 contribution (approximately Rs 85,529) will now be credited to what’s called a “Trump Account,” according to reports.

Who is Eligible for the $1,000?

The program will benefit children born in the United States from January 1, 2025, to January 1, 2029. The funds will be invested on behalf of these children, who can access the money later for specific expenses, like buying a home or funding their college education.

Children and their parents will need a Social Security number to register automatically for the initiative. The accounts will be created and funded by the US Treasury Department.

Besides parents, other individuals can also contribute to these accounts, but there’s a limit of $5,000 per year.

In addition, the government will deposit an initial $1,000 into the eligible children’s accounts.

When Can Funds Be Withdrawn?

Once the child reaches 18, they will be allowed to withdraw half of the funds from their “Trump Account.” The remaining balance can be accessed for approved uses when the account holder is between 25 and 30 years old. After turning 30, they can use the funds for any purpose.

However, this proposal raises questions among tax experts. Contributions must be made from post-tax income, and any profits will be taxed when withdrawn. It seems to function like a regular investment account rather than a tax-advantaged account.

Profits will be taxed at the long-term capital gains rate, and if the funds from the “Trump Account” are used for unapproved purposes, they will be taxed as income. Additionally, a 10% penalty may apply if the money is misused.